DAILY REVIEW OF NATURAL GAS & CRUDE OIL PRICING - ALONG WITH RELATED NEWS / Part 4
CRUDE OIL - CONTINUED
Index To Articles
11/12 01:46 US Crude Outlook - Imports soar, bears in control
11/12 01:56 US Products Outlook-Imports, restarts pound products
11/12 03:18 Qatar says expects West to hit Iraq before Nov 30
11/12 07:49 U.S. ready for decisive Iraq strike - officials
11/12 07:38 Early NYMEX Energy Futures Calls: Higher
11/12 01:46 US Crude Outlook - Imports soar, bears in control
NEW YORK, Nov 9 - The U.S. crude market could be set for another bruising this week, as a stream of imports heading for an already saturated market looks likely to keep oil prices the defensive, traders said Monday.
Even rising tensions between Iraq and the United Nations appeared to take a back seat to worries about oversupply on Monday, as the front-month futures contract settled down almost 50 cents a barrel.
By the close of trade, the New York Mercantile Exchange contract stood at just $13.38 a barrel, the sixth consecutive session that the contract has finished lower.
"I think the flat price is going to test $13 pretty quickly," one cash crude trader said Monday. "There's just too much oil around." U.S. crude stocks have climbed steadily higher over the last month, and at 344 million barrels, stand some 31 million barrels above last year, according to the latest American Petroleum Institute (API) figures.
This week's API report could show another sharp rise in stocks, given the stream of imports heading into the U.S. Gulf Coast, traders said.
The explosion in imports includes crude cargoes steaming over from the North Sea and West Africa, attracted by the relatively wide spread between world benchmarks West Texas Intermediate/Cushing and North Sea Brent. By the close of trade Monday, WTI stood at a $1.48 a barrel premium to Brent, easily enough to make incremental shipments from Europe to the U.S. profitable.
On the Gulf Coast, December Brent is being offered at $1.05 a barrel under January WTI/Cushing prices, compared with offers at a 90-cent discount last week.
Colombia's Cusiana is also well supplied, after more than 2.5 million barrels of the light sweet crude was sold to U.S. companies last week. The four cargoes, scheduled to load between Dec. 8-22, were sold between $1.49 and $1.64 under WTI/Cushing by state oil company Ecopetrol. In the previous Ecopetrol sale, three early December loading cargoes were done at around minus $1.60-1.55 a barrel.
As competition to supply both sweet and sour crude intensifies, Saudi Arabia and Mexico have announced sharp cuts to their official selling prices over the last couple of days.
For the Americas, Pemex lowered its price on Maya heavy crude oil by 30 cents per barrel, while cutting its price on extra light Olmeca by 10 cents and Isthmus by 20 cents for December. The cuts, one trader said, came as yet another sign that "the market is looking bad."
Crude traders said the Saudi price cuts were no less steep, reporting a 25-cent decline in Arab Light and Arab Heavy prices, and a 35-cent drop in Arab Medium prices. They added that the Berri Extra Light price was cut 20 cents to $2.60 under WTI/Cushing.
Oversupply is also taking its toll on U.S. crude prices, particularly Light Louisiana Sweet/St. James, the grade most sensitive to competition from imports.
LLS/St. James was valued at a relatively cheap 45-40 cents under benchmark West Texas Intermediate/Cushing on Monday. Heavy Louisiana Sweet/Empire, which is less liquid than LLS, appears similarly weak at 67-62 cents under WTI/Cushing.
Also, an international major is said to be offering Cusiana out of the Louisiana Offshore Oil Port (LOOP) at parity to LLS/St. James.
Sycrude Canada, meanwhile, said Monday that its synthetic oil production was nearing its 230,000 barrels per day capacity once again after it had been cut in about half last week by mechanical problems at an upgrading plant. The supply interruption had provided some short-term support to sweet crude prices, but a company spokesman said repairs had been completed over the weekend.
11/12 01:56 US Products Outlook-Imports, restarts pound products
NEW YORK, Nov 2 - Bearish pressure from imports and from last week's return of two U.S. refineries from fall turnarounds should dominate oil products this week, traders said.
"You think gasoline is cheap here? The price is desperately cheap in Asia and Europe," said one Gulf trader about the situation cracking open the arbitrage window in the New York Harbor.
While traders said at least 12 cargoes of gasoline were in the water on their way to the New York Harbor, one Gulf trader said six cargoes were fixed to ports all over the U.S. on Monday alone.
Those six included cargoes from Europe, where the Rhine River, a major route to the Rotterdam refining hub, is flooded and partially closed to barges, and a cargo from St. Croix in the U.S. Virgin Islands.
Also adding pressure on products is the fact the scheduled maintenance season is over, with no more major turnarounds on the slate until the spring.
Last week Sun Co. <SUN.N> restarted its 177,000 barrel-per-day (bpd) crude distillation unit at its Philadelphia refinery which was just part of around 430,000 bpd of production to return from maintenance shutdowns that week.
The Sun turnaround came just Tosco's Bayway turnaround, and the two combined helped knock East Coast crude runs to their lowest level in five years.
The low level of crude runs caught some New York traders short last week after a small draw on gasoline brought about in part by short supplies of blending stocks. This week traders said prices should be beaten down.
"Gasoline has been unusually strong with a number of turnarounds in the northeast - i expect it will soften," said one New York trader with a major refining company.
"On the distillates, it is the same type of situation -- there will be a bit more pressure until the we see colder weather," he added.
Distillates in the northeast were supported last week as traders with storage took advantage of the contango in the market to buy the cheaper prompt supplies of the heating fuel, lifting outright prices by over a penny to around 38 cents per gallon.
Now Gulf traders say the additional storing of heating oil in the New York Habor leaves little room for Gulf gasoline to be sold to up North. In addition, adding further pressure, traders said that gasoline storage was high in the Midcontinent trading hub and the Caribbean.
"Nothing looks bullish here all week," said one Gulf trader.
In the Harbor, traders said jet fuel was the only thing looking up, still in short supply from refinery problems in the Gulf. "There is not a whole lot of jet around...there is a lot of demand but very low stocks," said a Northeast trader.
11/12 03:18 Qatar says expects West to hit Iraq before Nov 30
KUWAIT, Nov 12 - Qatar's foreign minister said in remarks published on Thursday that he expected military strikes against Iraq to be launched before the end of November.
"I can say that the inclination towards a military strike is stronger than before and I expect that the strike will occur before the end of the current month," Sheikh Hamad bin Jassim bin Jabr al-Thani told al-Rai al-Aam daily in an interview in Doha.
"The situation now is escalating and this escalation must not continue because I see the doors for a diplomatic solution almost closed or closed. The situation between Iraq and the United Nations has become critical to a point that a diplomatic solution would be hard to find," he added.
The United States on Wednesday ordered a major build-up of troops and weapons near Iraq and U.S. President Bill Clinton said he was ready to use force to compel Baghdad to submit to U.N. weapons inspections.
The United Nations, Britain, Australia and the United States have begun moving staff in the Gulf region out of harm's way, and for the first time in seven years all U.N. weapons inspectors and their support staff were withdrawn from Iraq.
Baghdad says it will not reverse its October 31 decision to halt cooperation with inspectors trying to enforce compliance with U.N. resolutions ordering the eradication of Iraqi nuclear, biological and chemical weapons.
Qatar "told the brothers in Iraq that the subject is important and serious and there must be cooperation with" the U.N.'s arms inspection teams, Sheikh Hamad said.
11/12 07:49 U.S. ready for decisive Iraq strike - officials
KUWAIT, Nov 12 - The United States and Britain are beefing up their forces in the Gulf for a major military campaign against Iraq, officials and defence sources said on Thursday.
"It is not going to be like Afghanistan and Sudan, firing a few cruise missiles in the air," said a senior Western officer familiar with preparations for possible strikes to punish Iraqi President Saddam Hussein for refusing to cooperate with United Nations weapons inspection teams.
"It is going to be a far-reaching and major operation provided he does not raise his hands in the air after the first day and say 'I had enough'."
Other military experts and officials cited the number of additional U.S. ships, planes and troops being sent to the region as a sign that Washington was planning to bomb Iraq into meeting all U.N. arms inspection demands.
"This does not look like a surgical operation against a few key targets," a Western ambassador said. Washington is sending 18 B-52 and B-1 bombers along with 12 radar-avoiding F-117A "stealth" jets. The buildup, the second this year, will bring U.S. forces poised near Iraq to more than 300 aircraft and 20 ships, including two aircraft carriers. Some 3,000 U.S. troops are also expected to come to Kuwait to join the 1,500 regularly deployed near the Iraqi border.
"If you listen closely to Washington and London you will realise that they stress on the word 'decisive' action -- that is the critical word. They plan to seriously hit the regime and its capabilities," said a Western officer.
But defence experts doubt the operation would include a ground confrontation as crossing into Iraq could draw major objections from other world powers and regional states.
"But you never know with Saddam," one Gulf official said. "If he retaliates against the strikes by trying to cross into Kuwait again or fire missiles at neighbours then you could see a need and sufficient support for ground operations."
Although no date has been set, some officials in the region say a strike could be days away, adding Washington had told Abu Dhabi it would take into consideration the opening of the annual Gulf Arab summit in the United Arab Emirates on December 7.
Arab opposition to military action is slowly building, although some states blame Iraq and have urged Baghdad to reverse its decision to end cooperation with the U.N. teams.
Iraq is under stringent sanctions and U.N. weapons monitoring over its 1990 invasion of Kuwait.
The military buildup comes at a time when Gulf Arab states are suffering from a sharp drop in revenues due to weak oil prices, limiting their ability and desire to at least partly finance the operation.
Haggling over payment has led to many disputes since the costly 1991 Gulf War, with repeated buildups in response to crises with Iraq.
A caricature in the Thursday edition of Kuwait's al-Rai al-Aam newspaper showed American, British and French representatives filling money bags every November from a tap marked Gulf.
The last crisis with Iraq ended in February with an accord brokered in Baghdad by U.N. Secretary-General Kofi Annan.
11/12 7:38AM - Early NYMEX Energy Futures Calls: Higher
New York-Nov. 12-FWN--
--Crude oil futures are called to open 25 cents higher.
--Heating oil is called 100 points higher and unleaded gas futures are called to open 70 points higher.
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