MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING WEDNESDAY, FEBRUARY 11, 1998 (3)
OIL & GAS
NYMEX
Crude Oil
Oil prices closed lower on what was seen as a conciliatory measure by Iraq aimed at avoiding a military conflict over United Nations weapons inspections. Oil prices closed lower after Iraq eased its resistance to United Nations pressure to comply with weapons inspections rules set up after the 1991 Gulf War.
Iraq offered to open eight presidential sites for inspection for 60 days provided U.N. Secretary General Kofi Annan and the U.N. Security Council overrode their U.N. weapons inspectors and took direct control of the search for forbidden arms.
At the New York Mercantile Exchange, March crude oil closed 28 cents a barrel lower at $16.15, after trading as high as $16.66 before the Iraq news hit.
"The news itself that Iraq was making what it thought was a conciliatory gesture just provided an excuse for selling," said Tim Evans, an analyst with Pegasus Econometric Group in New York.
"The market was already vulnerable because even if there is a military strike, it probably will not result in a long-term supply disruption," said Evans.
The U.S. has built its largest military force in the Middle East Gulf since the Gulf War as it prepares to launch a military strike if Iraq continues to refuse to fully comply with U.N. weapons inspections.
On Wednesday the United States rebuffed Iraq's proposal for limited inspections, which traders said slowed down the selling. World oil supplies continue to build, but the threat of military action in the oil-rich Gulf has not vanished.
March gasoline closed 0.96 cent a gallon lower at 50.17 cents and March heating oil 0.38 cent lower at 45.06 cents.
Natural Gas
March natural gas settled down $.030 at $2.238 for the day.
The closing report was unavailable. The following information was released mid-day
Natural gas futures rallied Wednesday morning, then mostly drifted lower at midday in moderate trade, as early talk of firmer physical prices gave way to technical selling when upside momentum stalled.
At 1305 EST, March slipped 2.3 cents to $2.245 per million British thermal units after stalling early at $2.295. April was 1w5 cents lower at $2.285, while most other months were flat to down one cent.
"We're holding at these lower numbers, but I don't think you want to be long the front. Looking forward, there's no (cold) weather on the horizon. It's supposed to be even milder next week," said one New York-based trader, adding he expected summer months to hold better on any move lower.
Forecasts still call for above-normal temperatures across the U.S. this week, with levels in the Midwest expected to warm to 10-20 degrees F above normal. Warmer than normal weather is expected to continue into next week in the Northeast, upper Midwest and stretching across the uppermost northern plains.
In addition to weather concerns, traders said the year-on-year stock surplus continued to weigh on sentiment.
A Reuters poll showed most expected a weekly AGA inventory draw in the 115-125 bcf range when the report is released later today. For the same week last year, stocks fell 75 bcf, meaning a decline today in the expected range would trim the year-on-year surplus to 205 bcf.
Chart traders saw minor March resistance in Monday's $2.32-2.35 gap, with major selling expected at the recent high of $2.435 and then in the $2.50 area. Further resistance was seen at prominent highs in the low-$2.70s.
Minor support was pegged at yesterday's low of $2.205, with $2.18 seen as the more important number. Next support was in the $2.03 area.
In the cash Wednesday, Gulf Coast swing quotes were flat to up slightly in the mid-to-high teens. Midcon pipes showed similar movement at about $2.10. Chicago city gate gas was quoted slightly higher in the low-to-mid $2.20s, while New York was flat in the high-$2.30s to $2.40 area.
NYMEX said an estimated 15,146 Hub contracts traded at 1100 EST. Hub open interest on Feb 10 rose 1,259 contracts to 197,217.
CANADA SPOT GAS
No report available.
U.S. SPOT GAS
U.S. spot natural gas prices edged higher Wednesday on incremental demand and NYMEX's marginal premium to cash, industry sources said. However, March gas futures quickly retreated from the session highs, thereby putting some downward pressure on cash prices.
Forecasts still call for above- to much-above-normal temperatures across the U.S. this week. Warmer-than-normal weather is expected to continue into next week in the Northeast, upper Midwest and stretching across the uppermost northern plains.
Swing gas at Henry Hub was quoted mostly at $2.20 per mmBtu, though early deals were reported done as high as $2.25.
In western Texas, Permian prices were also slightly higher at $2.01-2.06, while San Juan values popped up to about $2.03-2.04.
At the southern California border, prices gained two cents to mostly $2.20-2.21.
In generation news, restart of the 498 megawatt (MW) unit 4 at the San Juan coal plant in New Mexico was expected to restart Wednesday or early Thursday after being shut over the weekend for tube leak repairs. The adjacent 316 MW unit 1 was taken off line as planned last Friday for about three weeks of maintenance.
Also in New Mexico, the 750 MW unit 5 at the Four Corners generating station was shut late Tuesday for repairs. No restart date was yet set. This follows Monday's unplanned outage at a 220 MW unit at the Four Corners plant. This unit is expected to restart this weekend.
Meanwhile in the Midcontinent, prices climbed two cents to about $2.10-2.11, with Chicago city-gate quoted mostly at $2.23-2.24.
In the East, New York city gate prices were quoted mostly around $2.40, while Appalachian prices on Columbia stepped up to $2.27-2.32.
OIL & GAS REFERENCES
Charts:
oilworld.com
oilworld.com
NYMEX Reference:
quotewatch.com
INDEXES
The Toronto Stock Exchange 300 Composite Index gained 0.9% or 63.29 to 6944.78. In comparison, the Oil & Gas Composite Index gained 0.7% or 42.25 to 6436.94.
Among sub-components, the Integrated Oil's climbed 1.2% or 106.73 to 9032.78. The Oil & Gas Producers gained 0.5% or 26.87 to 5623.72. The Oil & Gas Services Index rose 0.2% or 4.48 to 2766.28.
INDEX CHARTS
TSE 300.......... canoe.quote.com
O&G Composite. chart.canada-stockwatch.com
Integrated Oil's.... chart.canada-stockwatch.com
O&G Producers.. chart.canada-stockwatch.com
O&G Services..... chart.canada-stockwatch.com
NEW PHLX OIL SERVICE SECTOR
bigcharts.com.
lonestar.texas.net
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