MARKET WRAP -8 / Crude Oil Weekend Scenario-News
Column Content Index
12/11 10:05 CTA's do best shorting energy markets in November
12/11 11:20 U.S. says awaiting U.N. tests of Iraqi compliance
12/11 11:35 Iran delays oil opening plans amid price gloom
12/11 13:52 Mexico's Tellez to fly to Venezuela for oil talks
12/11 16:07 Producers raise alarm over oil price slump
12/11 16:42 NYMEX oil, products end week up, but gloom remains
12/11 10:05 CTA's do best shorting energy markets in November
NEW YORK, Dec 11 - Short selling the energy commodity markets yielded some of the strongest results for the top performing CTA's (Commodity Trading Advisors) in November, according to fund performance monitor, Tass Management Ltd. Substantial gains were reported by shorting crude oil, heating and natural gas, while trades in financial markets such as buying the S&P500 index futures and and shorting the Japanese yen were also cited as successful strategies.
But overall November's results were disappointing, Tass chief executive Nicola Meaden said.
The top two futures and currency managers for the month were AIS MAAP (Leveraged 2x-4x Including Notional) with an estimated 12.65 pct return for the month, followed by Hampton S&P500 Index Futures (Leverage 3) with an estimated 10.50 pct gain.
The TASS monthly report follows the performance of 92 futures and currency programs, each with a minimum of $45 million under management.
Tass Management Ltd is a London based investment research firm which tracks about 1,600 alternative investment managers and funds globally who managing $18 billion in assets.
The alternative investment universe includes hedge funds, CTAs, managed currency managers, emerging market funds and funds of funds.
12/11 11:20 U.S. says awaiting U.N. tests of Iraqi compliance
WASHINGTON, Dec 11 - The United States said on Friday it would take no military action against Iraq until it had the results from a series of U.N. initiatives to test Iraqi compliance with its agreements on weapons inspections.
"They are in the middle of that right now. We want to see this process play its course," President Bill Clinton's national security adviser, Sandy Berger, told reporters during a briefing on Clinton's upcoming Middle East trip.
Baghdad has refused a demand by UNSCOM (U.N. Special Commission) for documents and has blocked inspection of an office of the ruling Baath Party despite agreeing to unfettered access when faced with U.S. military strikes last month.
Secretary of State Madeleine Albright, also at the briefing, rejected a suggestion that Washington, by not using the U.S. military force still in the region, was giving Iraqi President Saddam Hussein a green light to continue interfering with UNSCOM's work.
"Absolutely not," she said.
She said that during a visit to NATO headquarters in Brussels and France this week she assured U.S. allies of U.S. resolve to act without warning if Iraq continued to defy U.N. demands.
She said she told allied states that "if there is not compliance ... there are no warnings and that diplomacy has come to an end".
She added: "But at the moment, we are in the middle of the process that (UNSCOM) is undertaking and therefore, I think we need to wait to see what our reaction is, depending upon what we learn his inspections have brought about, or if there is compliance or non-compliance."
Berger was asked whether the United States was backing away from a pledge to strike Iraq if it broke that agreement. "I think we've said all along that the best option here would be an UNSCOM that can do its job. If UNSCOM can't do its job, then we're left to take our own action. And that continues to be our position," Berger said.
He said a process of challenges by UNSCOM, headed by its chairman Richard Butler, was testing the extent of Iraq's willingness to comply.
"Chairman Butler -- and we -- will make a judgment as to whether UNSCOM can do its job. If it can, that's so much the better. If it can't, then we will be faced with our own decisions about how to respond," Berger said.
The inspectors, who have been working in Iraq for seven years, are charged with scrapping Iraq's weapons of mass destruction. Sanctions imposed for Iraq's 1990 invasion of Kuwait cannot be lifted until the inspectors' work is done.
A weekly UNSCOM report on Thursday said Iraq had imposed conditions on chemical monitoring and biological weapons teams, leading to postponement of work by the biological team.
12/11 11:35 Iran delays oil opening plans amid price gloom
LONDON, Dec 11 - Iran has had to delay application deadlines for almost all its new oil investment opportunities as sliding prices threaten to derail its historic energy opening.
From an original November 30 deadline Iran has now pushed the submission date back to December 22 for some projects and as far back as February 13 for many others, industry sources said on Friday.
The move is a blow for Iran's tender of over 40 exploration and production prospects, its biggest energy opening since the 1979 Islamic revolution
Shell's <SHEL.L> long talks on a huge planned project to develop part of the South Pars gas field are also caught in the logjam as negotiations stall over the economics of a supply pipeline either within Iran or all the way to Pakistan.
While some industry sources have said Iran was aiming to award phases four and five of South Pars, probably to Shell, by the end of January, sources close to the talks now say this looks unrealistic.
Progress on the wider opening has slowed on foreign company concern over contract terms, latent opposition at home to the international opening, and state-owned NIOC's lack of experienced staff, foreign executives said. "Around ten to fifteen of the development ventures seem to have been fairly heavily subscribed but interest in exploration and the other production projects has been slow," said one industry source.
A harsh price crash -- taking prices to yearly average lows not seen for over two decades -- has shaken Iran's 'buy-back' model which aims to avoid constitutional opposition to foreign equity ownership of oil.
Because Iran repays private firms' investment in 'buy-back' through oil production, the lower prices go the more oil Iran will have to give up to pay the foreign firms.
This could attract conservative opposition at a time when President Mohammad Khatami is already under attack from hardliners for his staunch defence of his "civil society" programme, executives say.
Foreign firms also fear that OPEC quota strictures may stop Iran from fulfilling its payback commitment. Iran already produces above its official OPEC allocation, saying that the formal level was set unfairly low.
Growing Iranian worries over the effect of low prices on its upstream opening sparked much of the acrimony at OPEC's latest ministerial meeting last month.
Tehran fears that Saudi Arabia, easily the world's biggest producer, is keeping prices low to spoil the opening to foreign finances of Iran's upstream industry.
The one 'buy-back' project to have escaped delays is expansion of the offshore Soroush development, where a semi-private Iranian firm has struggled to fulfill an existing contract.
Executives expect Soroush to be one of only two or three new deals to be announced before the Iranian new year in March. Industry insiders predict Iran will want to secure a big name such as BP <BP.L> or Shell to revive the credibility of the buy-back process.
Italy's ENI <ENI.MI> and France's Elf <ELFP.PA> have long been tipped to secure the offshore Doroud field.
NIOC has made it clear that it will not renegotiate the 'buy-back' contracts.
12/11 13:52 Mexico's Tellez to fly to Venezuela for oil talks
MEXICO CITY, Dec 11 - Mexican Energy Minister Luis Tellez will travel to Caracas on Friday to discuss oil prices and production cut commitments with Venezuela President-elect Hugo Chavez, the ministry said.
"The purpose of the meeting is to exchange points of view regarding the current position of the international oil markets," the energy ministry said in a statement.
12/11 16:07 Producers raise alarm over oil price slump
LONDON, Dec 11 - Desperate oil producers are warning of social unrest and potential economic warfare if action is not taken soon to reverse a calamitous oil price slump. International benchmark Brent closed at $9.82 a barrel on Friday, up 18 cents, after briefly touching a low of $9.60 on Thursday.
Algeria highlighted rising producer alarm with a broadside against fellow OPEC members it accused of deepening the price crisis, and a vow to take action to protect its own interests.
"The drop in oil prices is not because of economic considerations but has more to do with the selfishness of certain OPEC members," Algerian Prime Minister Ahmed Ouyahia told parliament late on Thursday.
"Algeria remains in solidarity with OPEC, but if this selfishness persists, Algeria will utilise all its capacities. We are in a situation of an economic war."
Producer tensions are growing as their output sacrifices are rewarded only with further price falls, a combination that has sliced more than $50 billion from OPEC's oil export revenues this year.
Algeria's threat partnered a warning from Libya that oil-dependent economies face severe social unrest unless producers move quickly to make new production cuts.
Libyan Energy Minister Abdullah al-Badri demanded that OPEC should withdraw a further two million barrels per day (bpd) of output, on top of its existing 2.6 million bpd package.
"I call (on OPEC members) to move quickly because the situation is becoming very dangerous and might lead to social problems in these countries," al-Badri told the Libyan Congress on Thursday.
A 35 percent crash in Libya's oil revenues this year had left the government unable to pay state salaries, added Finance Minister Mohamed beit al-Mal.
OPEC countries and other oil producers like Russia and Mexico have been forced to slice state budgets and axe capital expenditure.
OPEC's current reduction of 2.6 million from the world's 75 million barrels daily supply has proved far too feeble to counter the impact of swollen inventories and dwindling demand.
Yet at last month's ministerial meeting the cartel failed even to extend existing cuts as declining revenues laid bare a long battle for market share between key members Saudi Arabia, Venezuela and Iran.
While Saudi Arabia and other big Gulf producers this week did agree to extend cuts through to the end of 1999, Venezuelan President-elect Hugo Chavez on Thursday declined to commit to extending reductions beyond June.
Chavez has already said he does not foresee any new production cuts.
Without agreement from Caracas, its rivals for the big U.S. market, Saudi Arabia and non-OPEC Mexico, are unlikely to cut again, raising the spectre of further price falls before OPEC meets again in March.
12/11 16:42 NYMEX oil, products end week up, but gloom remains
NEW YORK, Dec 11 - Crude oil futures on the New York Mercantile Exchange (NYMEX) held tight to small short-covering gains at the close Friday, as the week tailed off quietly but still stuck around 12-year lows, traders said.
At the close, NYMEX front-month crude last traded at $10.77 a barrel, up five cents. It settled at $10.79, up seven cents, on market on close orders.
The contract climbed, technically driven, to a high of $11.02 in afternoon trading, but eased due to late selling.
It slumped to $10.65 in early trade, equaling the June 27, 1986, low, before bouncing back.
After that, "the late selling kept crude sliding down, and in the current bearish conditions, I think we will trend lower next week," said a NYMEX trader.
Traders are pessimistic that producers, chiefly members of the Organization of Petroleum Exporting Countries (OPEC) will move soon enough to help lift oil prices, which continue to be severely pressured amid a large supply overhang.
Heating oil and gasoline futures lopped off earlier gains.
January heating oil last traded at 31.45 cents a gallon. It settled at 31.50 cents a gallon, up 0.15 cent, edging up from an overnight low of 31.25 cents.
January gasoline last traded at 34.25 cents a gallon, up 0.25 cent, and then settled at 34.34 cents, up 0.34 cent.
In London, the January Brent contract on the International Petroleum Exchange last traded at $9.82 a barrel, up 18 cents. It moved down a bit from a session high of $9.95 as it failed to pierce resistance pegged at $10.
Early in the week, news that Saudi Crown Prince Abdullah had called on oil producers totake further measures to rescue oil prices helped buoy prices.
The prince spoke at a summit of Gulf Arab leaders in Abu Dhabi, which ended with a pledge by its six members to extend current production cuts to the end of 1999. Of the six members, Saudi Arabia, Kuwait, the United Arab Emirates are OPEC members while Oman and Bahrain are independent producers.
Kuwait said the current market slide justifies an emergency meeting of OPEC, before it gets together at its spring conference in March. Traders found the news supportive, but it appeared to have little backing at this time among OPEC members.
The market got roiled again midweek after Venezuela's president-elect, Hugo Chavez, said his country does not foresee any new cuts in production, but that it will comply with current output-cut agreements.
Amid mounting budget problems, division within OPEC surfaced Thursday when Algeria, a strong supporter of production cuts, blamed the current depresssed oil prices on some fellow OPEC members, which it faulted for their "selfishness."
No countries were named, but other OPEC members had recently singled out Venezuela and Iran as primary overproducers.
As the week ended, Mexican Energy Minister Luis Tellez was reported flying to Caracas, to meet with the Venezuelan president-elect and disucss oil prices and production cut commitments. Tellez's trip was the start of a series of visits to unspecified oil-exporting nations to discuss ways to support oil prices.
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