MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING TUESDAY, FEBRUARY 24, 1998 (3)
OIL & GAS
NYMEX
Crude Oil
Crude Oil Ends Off 46-Month Low, Iraq Deal Focus
Crude oil futures at the New York Mercantile Exchange Tuesday closed just off a 46-month low reached Monday, unable to shake off the bears as the U.N.-Iraq pact appears for the moment deterring a clash in the Gulf.
NYMEX sweet light crude for April delivery closed off six cents a barrel at $15.31, down from a high of $15.56. The market had opened at $15.50 -- just about the level traders had predicted but soon treaded lower, reaching a low of $15.30 for the day.
March heating oil was up 0.14 cent to 42.67 cents a gallon while March gasoline was down 0.72 cent to 47.56 cents a gallon, ahead of the American Petroleum Institute's release of weekly inventory data.
''The market is trying to digest the news about the agreement brought back by the U.N. Secretary General,'' said a trader, who noted that details were being awaited by all quarters.
He was referring to an accord negotiated by U.N. Chief Kofi Annan with the Iraqi leadership which provides for ''immediate, unconditional and unrestricted access'' of U.N. teams to inspect eight Iraqi sites suspected of storing weapons of mass destruction.
The arms-inspection issue, in which Iraq had prevented U.N. teams from inspecting the suspected storage sites, had caused the current Gulf crisis.
Annan, speaking to reporters at U.N. headquarters in New York, exuded confidence the agreement he negotiated in Baghdad would have Security Council support, although details would have to be worked out and explanations given, he said.
U.S. Ambassador to the U.N. Bill Richardson immediately raised some doubts on the agreement and said further clarifications were needed.
Earlier in the day, U.S. Secretary of State Medeleine Albright, in testimony before a congressional panel, said there were ''questions and ambiguities'' in the agreement and that the U.S. would work to close ''any loopholes.''
Their positions reflected the cautious stance by President Bill Clinton who said Monday that while he would give the agreement a chance to work, Iraq faced ''serious consequences'' if it did not honor the accord.
In the meantime, a U.S.-led military force in the Gulf will remain there, ready to act if Iraqi leader Saddam Hussein violated the agreement.
''The devil is in the details,'' said a NYMEX trader, saying much hangs in the balance because the full picture ''is unclear.''
Morteza Zarringol, head of Iran's Majlis (parliament) oil commission was quoted as saying in the Iranian newspaper Farda that Iran had been awaiting signal from Saudi Arabia about a Saudi move to cut production to prop up the currently depressed crude prices.
''Despite Iran's lobbying during recent weeks we haven't received a green light from Saudi yet (indicating it would cut output),'' Zarringol told the newspaper.
''Unless Saudi Arabia reinforces oil prices in the oil market for political considerations, it will not reduce its production,'' Zarringol was also quoted as saying.
''It's hard to figure out the market at this point, it's a little bit contrary,'' said Chris Schachti, a trader at Atlanta-based GSC Energ. He noted there was buying on ACCESS overnight and early trading forecasts were for an upside.
IPE Brent for April ended flat at $13.83 a barrel, with short covedring and fund bying helping it hold steady after sharp losses amid the U.N.-Iraq deal.
With the world oil glut remaining and with the prospect of the oversupply situation continuing with the expanded ''oil-for-food'' deal the U.N.Security Council approved for Iraqlast Friday, it is hard to see why prices will not continue to fall, said Southeast Energy's Tom Mooney.
"I don't see anything to prop it up" at this time, he said.
Natural Gas
NYMEX Hub Natural Gas Mostly Ends Up On Short Covering
Natural gas futures mostly ended higher Tuesday in a fairly active session, boosted by short covering ahead of March's expiration tomorrow though prices remained in the recent technical range, sources said.
March climbed 3.7 cents to close at $2.216 per million British thermal units after trading today in a fairly narrow range between $2.175 and $2.23. April settled 3.5 cents higher at $2.262. Other months ended flat to up 2.7 cents.
''They couldn't break it down early, but there was a lot of resistance (in March) above $2.215. We look stuck here, but I still think March could flush out to the $2.13-2.15 area on the close tomorrow,'' said one Midwest trader, noting the spot contract was set to expire Wednesday.
But despite more mild weather this week and a significant storage overhang versus last year, traders said cooler weather next week and attractive spreads still favored up front buying.
Withdrawal estimates for Wednesday's weekly AGA storage report range from 60 bcf to 100 bcf. For the same week last year, stocks declined 63 bcf. Overall stocks are nearly 300 bcf, or 26 percent, above year-ago levels.
Forecasts this week still call for mostly above normal U.S. temperatures, with levels in the Midwest expected to climb to as much as 12 degrees F above normal. But cooler, more seasonal Northeast and Midwest weather is forecast for the weekend, with some below normal levels possible by early next week.
On the technical side, traders agreed March was stuck in a range. Key support was still pegged at $2.15, followed by $2.03. Major resistance was seen in the $2.32-2.35 gap, and then at $2.435 and $2.50.
In the cash Tuesday, Gulf Coast swing quotes were little changed in the low-to-mid teens. Midcon pipes also were flat in the $2.06-2.11 area. Chicago city gate gas was still talked in the low-$2.20s, while New York also was unchanged in the high-$2.30s.
The NYMEX 12-month Henry Hub strip rose two cents to $2.382. NYMEX said an estimated 74,272 Hub contracts traded, up from Monday's revised tally of 47,038.
U.S. SPOT GAS
U.S. Spot Natural Gas Prices Hold In Tight Range
U.S. spot natural gas, like futures, traded in a tight range on Tuesday, stalled by bearish weather patterns and general uncertainty in the market, industry sources said.
Swing gas prices at Henry Hub were pegged at $2.18-2.20, steady from Monday's levels and still clinging to NYMEX's March gas contract, set to expire Wednesday. In the western Texas market, Permian prices also remained fairly steady at $2.02-2.03, while San Juan values stuck to about $2.00-2.02. Southern California border prices edged a little higher to the low-to-mid $2.30s as cooler than normal weather in parts of the Southwest kept some buyers in the market.
Cooler-than-normal weather is expected to cover the southern half of the U.S. next week, with the coolest weather likely in the Southwest.
However, normal to above-normal temperatures are forecast to continue in the Northeast and upper Great Lakes region next week.
In the Midcontinent, prices stayed at $2.07-2.10, with Chicago city gate still quoted at $2.22.
In the East, New York city gate prices were flat again in the mid-to-high $2.30s, while Appalachian prices on Columbia were quoted at $2.25-2.28.
Separately, withdrawal estimates for Wednesday's American Gas Association storage report ranged from 60 bcf to 100 bcf,
CANADA SPOT GAS
Canada Spot Natural Gas Prices Flat Again In Slow Trade
The Canadian spot natural gas market remained steady again on Tuesday in light trade, industry sources said. Spot gas at the AECO storage hub in Alberta was talked unchanged at C$1.62 per gigajoule (GJ), while March also still hung at C$1.62. Summer business was also quoted flat at C$1.64. Traders said the lack of spread between months left forward trading very quiet.
Weather Services Corp forecasts show highs in Calgary near 40 degrees Fahrenheit (F) and lows in the 20s F over the next few days.
Trading at Sumas, Wash., was also quiet amid talk of US$1.13-1.17 per million British thermal units (mmBtu).
In the eastern export market, Niagara gas prices were quoted off about one cent to US$2.30-2.34 per mmBtu, with temperatures expected to reach highs of 40 and 43 degrees F on Wednesday and Thursday, respectively.
Meanwhile, NYMEX's March gas contract was still stuck in a range, bouncing today between $2.175 and $2.23.
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