MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING THURSDAY, FEBRUARY 12, 1998 (5)
NYMEX
Crude Oil
Crude oil prices continued to fall Thursday toward four-year lows as oil traders wondered when or if the oil-rich Middle East Gulf will be disrupted by a military confrontation between Iraq and U.S.-led forces.
At the New York Mercantile Exchange, crude oil for March delivery closed 19 cents a barrel lower at $15.96, dipping below the $16 level for the first time since Jan. 26. The $15.70 low Jan. 25 was the lowest crude oil price since April 1994.
The United States and Britain have threatened Iraq with air strikes unless it grants U.N. weapons inspection teams unfettered access to suspected weapons sites, a condition of the 1991 Gulf War cease-fire.
Saber-rattling comments by U.S. officials in recent weeks had driven oil prices up $2 a barrel as nervous traders perceived an air strike by massing U.S.-led forces in the region was imminent. But none has been forthcoming, letting traders again focus on current significant over-supply in world oil markets.
The United States also faces stiff opposition to a strike against Iraq from fellow U.N. Security Council members Russia and China.
"There is probably a 70 to 80 percent chance that supply would not be affected by a military strike," said Bill O'Grady, an analyst with A.G. Edwards in St. Louis.
The Gulf region where Iraq is located is the source of most of the world's daily oil exports.
"The market knows that Saddam Hussein could emerge fine from his bunker after military strikes, and Iraq would be left with a deal that allows them to sell more oil," O'Grady said.
Britain Thursday circulated in the U.N. Security Council a resolution to increase from $2 billion to $5.256 billion the amount of oil Iraq would be permitted to sell over six months under a standing "oil-for-food" program it has with the United Nations, another sign that military action was not imminent.
Before the Iraq-U.N. standoff came to a head several weeks ago, oil prices had been in a four-month decline.
OPEC's decision last November to raise its production ceiling by 10 percent, even with world oil demand flagging due to economic turmoil in Asia and mild winter weather in the northern hemisphere, has swollen world oil inventories.
Tracking crude prices, products also closed weak and set new life-of-contract lows during the day.
March heating oil closed 0.49 cent lower at 44.57 cents a gallon and March gasoline 0.69 cent lower at 49.48 cents.
Natural Gas
Natural gas futures ended higher across the board Thursday in a quiet session, boosted by some daytime technical buying when support held on ACCESS, but few expected much upside without colder weather.
March climbed five cents to close at $2.288 per million British thermal units after trading between $2.23 and $2.27 for most of the day. April settled 5.4 cents higher at $2.331. Other months ended up by 2.8 to 4.8 cents.
"It was dead all day, then it rallied at the end. There was a little paper buying on the close, but we're still in the range," said one East Coast trader, adding ample storage and bearish weather forecasts should limit any upside.
Forecasts still call for mostly above-normal U.S. temperatures right through next week, particularly for the Midcontinent region. Texas and the South are expected to cool to about seasonal levels, then warm by midweek next week.
On the technical side, traders still pegged key resistance in March at Monday's $2.32-2.35 gap. Major selling should emerge at last week's prominent high of $2.435 and then in the $2.50 area.
After $2.20, key March support was at $2.18, with $2.03 the next level.
In the cash Thursday, Gulf Coast swing gas eased one to two cents to the mid-to-high teens. Midcon pipes were little changed at about $2.10. Chicago city gate gas was two cents lower in the low-$2.20s, while New York was slightly lower in the high-$2.30s.
NYMEX will be closed Monday for the U.S. Presidents Day holiday.
The NYMEX 12-month Henry Hub strip rose 4.5 cents to $2.44. NYMEX said an estimated 35,722 Hub contracts traded, little changed from Wednesday's revised tally of 35,999.
CANADA SPOT GAS
Canadian spot natural gas prices edged lower in Alberta but were mostly unchanged at the export points on Thursday, market sources said.
Spot gas at the AECO storage hub in Alberta was quoted about three cents lower at C$1.67-1.68 per gigajoule (GJ) as milder weather moved into the region.
Temperatures in southern Alberta were forecast to reach highs of 43 and 45 degrees Fahrenheit on Friday and Saturday, respectively.
Meanwhile, March AECO clung onto the daily market at C$1.68 per GJ.
In the export market, the recent decline in Sumas, Wash., prices came to a halt today as prices were reported mostly unchanged at US$1.19-1.20 per million British thermal units (mmBtu).
Few buyers entered the market as forecasts still called for normal to slightly above-normal temperatures in the U.S. Northwest amid heavy rains.
At Niagara, prices were quoted mostly steady at US$2.35-2.36 per mmBtu in sluggish trade.
U.S. SPOT GAS
Mild weather and a stagnant futures market chipped away at U.S. spot natural gas prices on Thursday, industry sources said.
Forecasts still call for above- to much-above-normal temperatures across the U.S. this week, a trend which is expected to continue into next week in the Northeast, upper Midwest and across the uppermost northern plains.
Swing gas at Henry Hub was quoted slightly lower at $2.17-2.22 per mmBtu, as temperature highs hovered in the 60s F across the Gulf Coast.
In western Texas, Permian prices slipped a few cents to mostly $2.02-2.03, with some shortcovering emerging late. San Juan values were similarly softer at $1.98-2.03.
In generation news, restart of the 498 megawatt (MW) unit 4 at the San Juan coal plant in New Mexico was back on line as of this morning 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, shut late Tuesday for repairs, was expected to restart early Monday. This followed Monday's unplanned outage at the 220 MW unit 3 at the Four Corners plant. This unit is expected to restart this weekend.
Furthermore, a 875 MW Intermountain coal unit in Utah was ramping back up this morning slightly ahead of schedule and was expected to reach full power later today.
Meanwhile in the Midcontinent, prices remained fairly steady at $2.10-2.13, with Chicago city-gate quoted mostly at $2.22, off one to two cents.
In the East, New York city gate prices were talked mostly in the high-$2.30s to about $2.40, while Appalachian prices on Columbia eased to about $2.25-2.29.
OIL & GAS REFERENCES
Charts:
oilworld.com
oilworld.com
NYMEX Reference:
quotewatch.com
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