MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING TUESDAY, JANUARY 27, 1998 (3)
QUOTE FOR THE DAY
Merrill Lynch & Co.'s chief market analyst, Richard McCabe.
"The October decline was likely a wake-up call that markets, like trees, do not grow to the sky".
McCabe was referring to Oct. 27, when the Dow Jones industrial average plunged 554 points, its biggest one-day point drop in history.
OIL & GAS
NYMEX
CRUDE OIL
Crude oil prices ended higher for a second straight day Tuesday on mounting concerns about a possible U.S. military strike against Iraq.
At the New York Mercantile Exchange, crude oil for March delivery closed 16 cents higher at $16.98 a barrel, up $1.24 since Friday after hitting 45-month lows last week.
Statements by U.S. officials Monday indicated that diplomatic options were running out for the United Nations in its dispute with Iraq over United Nations weapons inspections. Iraq and the U.N. teams have been at odds for months.
Baghdad has said the arms inspectors, charged with dismantling Iraq's weapons of mass destruction, have been deliberately prolonging their work so that sanctions imposed on Iraq for its 1990 invasion of Kuwait remain in place.
On Tuesday the Pentagon said Defense Secretary William Cohen is considering a visit to the Middle East Gulf region in early February to discuss possible military action against Iraq. The Gulf supplies most of the world's oil.
Jitters over such a possibility have caused the market to ignore bearish fundamentals, such as growing world oil stocks and production, weaker Asian demand and generally mild temperatures so far in the northern hemisphere's winter.
A separate force causing prices to rise has been the huge "short" or selling positions held by large speculative commodity fund investors in oil, given those fundmentals.
As prices have risen, funds have seen their losses widen, causing them to buy contracts to cancel out their market obligations and often cash in profits from the long downturn. Crude prices fell more than $6 a barrel since October before Monday.
"Funds have had an enormous pent-up need to cover their short positions for some time," said Warren Tashnek, president of Fimat USA Futures in Houston.
"While the supply fundamentals have not changed, you have to pay attention to Iraq which has been the excuse for funds to cover," Tashnek said.
Refined products continued to follow crude. February heating oil ended 0.06 cent a gallon higher at 47.25 cents and February gasoline 0.25 cent a gallon higher at 52.06 cents.
NATURAL GAS
Natural gas futures ended lower across the board Tuesday in an active session, again pressured by a soft physical market in the face of still-bearish weather forecasts, industry sources said.
February slipped 2.2 cents to close at $2.042 per million British thermal units, just off the $2.03 session low. March settled 1.1 cents lower at $2.062. Other months ended down by 0.6 to 1.3 cents.
"This thing doesn't want to die, but it's certainly on a respirator. There's no demand out there, and the weather forecast for the first week of Feb is not very supportive," said one East Coast trader.
Six- to 10-day forecasts still call for mostly above-normal weather across the U.S., with Midcontinent temperatures expected to rise to as much as 20 degrees F above normal by the weekend.
Early withdrawal estimates for Wednesday's weekly AGA inventory report range from 124 bcf to 165 bcf. For the same week last year, stocks declined 150 bcf.
Chart traders said February may expire Wednesday near current levels, noting there was little to push futures in either direction with cash and paper roughly at parity.
With February set to go off the board tomorrow, traders turned their attention to March, which closed below its short-term up trendline today, keeping the bulls on the defensive. March support was seen first at the ACCESS low of $2.04, with next support pegged at the recent $1.98 low. Better buying was likely ahead of the contract low of $1.93 from April, 1996.
March resistance was pegged at $2.18 and then at $2.23, $2.29 and the $2.375 double top.
In the cash Tuesday, Gulf Coast swing quotes slipped three cents to the $2.01-2.06 area. Midcon pipes were down about a nickel to the low-to-mid $1.90s. New York city gate gas fell five cents to the high-$2.30s, while Chicago was down slightly to the $2.07-2.10 area.
The NYMEX 12-month Henry Hub strip fell 1.1 cents to $2.227. NYMEX said an estimated 64,536 Hub contracts traded, up from Monday's revised tally of 53,789.
U.S. SPOT GAS
U.S. spot natural gas prices slumped lower Tuesday, still pressured by mild forecasts and a minor retreat on NYMEX, industry sources said.
Forecasts are still calling for warmer-than-normal weather across the U.S. through early next week, according to Weather Services Corp.
Swing gas at Henry Hub was quoted mostly at $2.05 per mmBtu, with prices ranging anywhere from $1.99 early to a high of $2.09. These prices are off an average of three cents from Monday's levels.
In the Midcontinent, prices eased five cents to the low-to-mid $1.90s, with Chicago city-gate pegged mostly at $2.08-2.09.
Similarly in the western markets, Permian Basin prices slipped about four cents to the low-$1.80s, while southern California border prices dropped to about $2.15.
Meanwhile, San Juan prices were quoted at $1.77-1.80.
El Paso Natural Gas reported today that the 30-inch gas line in western Texas that ruptured early this morning would likely return to service Wednesday. The pipeline was flowing at a rate of 650-700 million cubic feet per day.
In the East, New York city-gate prices slipped into the high-$2.30s to about $2.40, while Appalachian prices on Columbia were quoted at $2.16-2.18.
CANADA SPOT GAS
Canadian spot natural gas prices on Tuesday firmed again in Alberta but softened at the export points, market sources said.
Spot gas at the AECO storage hub in Alberta was quoted mostly at C$1.54-1.55 per gigajoule (GJ), up about six cents from Monday.
"People are concerned that field receipts are not showing up. I think they're behind on maintenance and drilling. And they're not pulling out of storage since all the prices are the same through the summer. It just doesn't make sense," one Calgary-based trader said.
Withdrawals totaled 850 million cubic feet (mmcf) on Monday, 900 mmcfd on Sunday and 1.1 billion cubic feet per day on Saturday.
February AECO was quoted at C$1.55-1.57, while summer rose to about C$1.56-1.58 per GJ.
Forecasts were calling for a high of six to seven degrees Celsius on Wednesday and then back to a high of three degrees by Saturday, one Calgary-based source said.
In contrast, prices at Sumas, Wash., spot gas prices fell another 11 cents to the low-US$1.50s per million British thermal units (mmBtu).
Temperatures in the U.S. Northwest were expected to average three to six degrees above normal in the western portion and as much as 10-20 degrees above normal in the eastern portion through the weekend, according to Weather Services Corp.
In the East, Niagara gas prices eased another three cents to $2.14-2.18 per mmBtu, in line with a February futures low of $2.03.
OIL & GAS PRICE REFERENCES
Charts: oilworld.com
NYMEX Reference quotewatch.com
|
