MARKET ACITIVITY/TRADING NOTES FOR DAY ENDING MONDAY, APRIL 6, 1998 (2)
OIL & GAS
Weak Oil Waits For Evidence Of OPEC Action
LONDON, April 6 - Oil prices slipped substantially on Monday in a market still unsure how to measure the impact of an oil producers' pact to remove surplus crude supplies.
Benchmark Brent blend for May closed 54 cents a barrel weaker at $13.87
The slump comes in spite of the landmark deal which saw Organisation of Petroleum Exporting Countries (OPEC) producers ratifying 1.25 million barrels a day (bpd) of output cuts at an emergency conference last week.
Oil exporters outside the cartel have pledged an additional 400,000 bpd of cuts, helped by surprise cooperation from China announced on Friday.
But traders remain sceptical, arguing that markets -- for the time being at least -- remain fundamentally oversupplied.
''The market lacks confidence in OPEC even though this time they seem to be serious,'' said a London-based oil broker.
''There's more than enough oil out there at the moment. Storage is full and the onus remains on OPEC to make its mark by withdrawing the supply it's promised.''
Signs that competition among the world's biggest oil exporters remains tough came on Monday from Saudi Arabia's announcement of another round of price cuts to its key U.S. customers.
The battle for market share between Saudi Arabia and its Latin American rivals has taken discounts versus benchmark grades to record levels.
Customers of major Gulf exporters have already reported output cuts beginning to bite into export programmes, with incremental volumes that were previously available no longer on the market.
But rising Iraqi exports will counteract the impact of the cuts after the United Nations gave Baghdad approval to increase sales under its exchange for food and medicines.
Oil Prices In Asia Ease After Rally Late Last Week
SINGAPORE, April 6 - Oil prices in Asia eased slightly on Monday backing away from levels reached late last week on news of further production cuts and pre-weekend shortcovering.
May North Sea Brent blend crude on the Singapore International Monetary Exchange (SIMEX) was untraded but quoted at $14.32/$14.43 per barrel at 0805 GMT.
June futures on SIMEX traded three cents lower at $14.70 compared with London's closing level of $14.73.
The May contract on the International Petroleum Exchange (IPE) closed 22 cents firmer at $14.41 on Friday, with the market receiving a boost on news of output cuts in China and a decree passed by Norway confirming its 100,000 output cut in support of the cuts announced by OPEC and non-OPEC countries.
China said on Friday it had cut production by 150,000 bpd to 2.65 million bpd since April 1 in support of the agreement.
Late U.S. Crude Oil Futures Flatten, Downturn Seen
LOS ANGELES, April 6 - U.S. crude oil futures were flat late Monday, and traders said the market would continue to decline due to oversupply concerns.
''Everyone feels we're looking to move lower,'' said New York-based trader on the ACCESS overnight market.
The market was uncertain whether a plan to cut output would strengthen prices, traders said, driving values lower in daytime trade.
Prices for May crude oil futures traded at $15.43 a barrel by 1600 PDT on ACCESS, traders said. The market is run by the New York Mercantile Exchange (NYMEX).
The trade dropped May prices by two cents, extending a daytime decline that saw the front-month contract fall 54 cents a barrel.
Roughly 948 crude oil lots were traded, with May volume around 463.
ACCESS prices for May unleaded gasoline traded at 49.80 cents a gallon, up 0.05 cent from the daytime close. Gasoline retreated by 2.01 cents a gallon in daytime markets.
Heating oil trade traded 42.70 cents a gallon on ACCESS after finishing the day at 42.83 cent a gallon, a 1.14 cent-fall on the day.
US Cash Crudes - Grades Weaker On NYMEX Drop
NEW YORK, April 6 - The half-dollar slide for front-month crude oil on the NYMEX caused a corresponding drop in outright prices for U.S. cash crude oil grades on Monday. Some grades, such as West Texas Sour/Midland, were devalued further by slightly weaker differentials to the benchmark West Texas Intermediate/Cushing.
But for the most part, differentials were unchanged from Friday's levels.
NYMEX traders on Monday said price cuts of Saudi Arabia's Arab Light crude oil to the U.S. by 15 cents further widened the difference between Arab Light to the U.S. and West Texas Intermediate. Arab Light for May delivery to the U.S. is priced at WTI minus $3.80, a record level.
The May NYMEX crude oil contract at 1415 EST/1815 GMT was down 58 cents to $15.41 per barrel.
With the exchange-for-premium (EFP) of eight cents to 10 cents, cash crude WTI/Cushing was talked in a range of $15.47 to $15.53.
WTI/Cushing postings-plus was done on Monday at $1.99 as well as $2.01 over WTI/Cushing. These levels are unchanged from Friday's.
Light Louisiana Sweet/St. James was done on Monday at 68, 69 and 70 cents below WTI/Cushing. At -72/-68 cents, LLS was talked about two cents weaker than on Friday.
West Texas Intermediate/Midland was unchanged at minus 39 cents to minus 36 cents to WTI/Cushing. ''Nobody's blinking and nothing's getting done,'' said one trader of the grade. West Texas Sour/Midland was down another four cents, to -$2.39/-2.34. WTS was done on Monday at -$2.36 and -$2.35 from WTI/Cushing.
Bids and offers for Heavy Louisiana Sweet/Empire got closer on Monday morning, but not deals were reported done. HLS was in a range of -$1.25/-1.20.
Offshore sour crudes Eugene Island (-$2.15/-2.05), was unchanged.
NYMEX Natural Gas Ends Mixed, Fronts Off As Longs Exit
NEW YORK, April 6 - NYMEX Hub natural gas futures ended narrowly mixed Monday in a sluggish session, with profit taking after recent gains pressuring front months, industry sources said.
May slipped 2.1 cents to close at $2.535 per million British thermal units after trading today between $2.525 and $2.57. June settled one cent lower at $2.566. Other months ended mixed, with some 1999 and year 2000 contracts finishing up slightly.
''It was a modest, profit taking session marked by low volume, but the funds have to be a little nervous here. Open interest is just 13,000 shy of a record, and there's no weather on the horizon,'' said one Midwest trader.
While rail shipping delays and dwindling coal supplies have helped prop prices recently, traders said it may take hotter weather to drive the market much higher.
Forecasts this week call for slightly below-normal Northeast and Mid-Atlantic temperatures, with the Midcontinent expected to range from normal to eight degrees F above. Texas by midweek will cool to several degrees below normal, while the Southeast will range from normal early in the week to 6-12 degrees below by Friday.
May resistance was still seen at last week's new high of $2.605, and then in the mid-$2.60s, which is a measurement objective from the previous leg up. Further selling should emerge at $2.812, a prominent spot continuation high from December.
Interim May support lies at the previous contract high of $2.46, with further support seen at the $2.33 double bottom. Major buying was expected at the $2.135 recent low.
In the cash Monday, Gulf Coast swing quotes were little changed in the mid-to-high $2.40s. Midcon pipes also were steady in the high-$2.30s. Chicago city gate gas was flat to down slightly in the mid-$2.50s, while gas in New York firmed several cents to the mid-$2.70s.
The NYMEX 12-month Henry Hub strip eased 0.6 cent to $2.605. NYMEX said an estimated 30,436 Hub contracts traded, down sharply from Friday's revised tally of 63,148.
US Spot NatGas Prices old Amid Storage Injections
NEW YORK, April 6 - U.S. spot natural gas prices failed to budge from last week's range on Monday as storage injections continued at a steady pace and cooler than normal weather created some demand in the upper Midwest and Southwest, traders said.
Henry Hub swing gas traded early at $2.49, but firmed by late morning to about $2.51-2.52, indicating little change from Friday's levels.
In the Midcontinent, prices were also flat at $2.37-2.39, with Chicago city-gate values seen mostly at $2.55-2.56.
In western Texas, Permian Basin prices were up about one cent to the high-$2.20s, while San Juan prices were talked at $2.14-2.17.
In the Northeast, New York city-gate prices stepped up a couple of cents to the mid-to-high $2.70s as cooler weather lingered today in the region and some nuclear power became unavailable. Appalachian values on Columbia were quoted at $2.65-2.67.
Several nuclear outages were underway in the Northeast. PP&L Resources' 1,094 megawatt (MW) Susquehanna 2 unit, shut Sunday to repair a leak, was expected to remain off line for ''several days.''
GPU Nuclear's 620 MW Oyster Creek unit was also shut Sunday while in the process of restarting from a maintenance outage. No restart date was yet available.
Also, PECO Energy Co shut its 1,055 MW Limerick 1 unit as scheduled on Friday for refueling and maintenance. The unit is expected to remain off line until mid-May.
Also shutting down over the weekend was Baltimore Gas & Electric's 850 MW Calvert Cliffs unit 1 in Maryland, which is scheduled to remain off line for refueling for about 55 days.
Forecasts for Tuesday and Wednesday are calling for slightly above normal temperatures in the Northeast but continued cooler-than-normal weather in the upper Midwest and Southwest. By the latter part of the week, cooler weather is forecast to return to the Northeast, while milder weather is expected to arrive in the Midwest and Southwest.
Canadian Spot Gas Prices Ease Amid Seasonal Temperatures
NEW YORK, April 6 - Canadian spot natural gas prices recoiled from earlier highs on Monday as seasonal weather kept demand at a minimum and some traders resumed storage withdrawals, industry sources said.
Spot gas at the AECO storage hub in Alberta was quoted at C$2.19-2.20 per gigajoule (GJ), while May business was reported done at C$2.17-2.18. Winter AECO prices were quoted at C$2.57-2.60.
About 200 million cubic feet per day (mmcfd) of gas was withdrawn from western storage on Saturday, while withdrawals on Sunday were tapered to about 130 mmcfd, one Calgary-based trader said.
He noted that he was anticipating storage withdrawals to drop further today, leaving inventories nearly unchanged.
Meanwhile, temperatures in southern Alberta were forecast to reach seasonal highs of about four to six degrees Celsius over the next few days.
In the export markets, prices at Sumas, Wash., also retreated to about US$1.80-1.81 per million British thermal units (mmBtu) from Friday's highs in the mid-US$1.80s.
In the east, Niagara prices softened by about two cents to US $2.65-2.66 per mmBtu.
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