MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING THURSDAY, MARCH 5, 1998 (4)
NYMEX
Crude Oil
NYMEX Gasoline Ends Weak, Quiet Session For Crude
Gasoline futures came under pressure on the New York Mercantile Exchange (NYMEX) and were the main feature in an otherwise quiet session Thursday, traders said.
Gasoline for April delivery ended down 0.61 at 49.70 cents a gallon, near the day's low of 49.50.
''The 'gas cracks' were getting creamed,'' said Raul Lagos, a trader at Prudential Securities in New York. ''People had bought them up on Tuesday and Wednesday when they moved up thinking they were going to run,'' he said.
The 'gas crack,' or spread between the per-barrel price of gasoline versus crude, shot up $1.50 from last week to early this week to about $6.00 before slumping Thursday back to $5.50.
The main reason was a burst speculative bubble, traders said, though there had been some rumor about a Mobil plant centered around product buying by that oil major.
Meanwhile, April-delivery crude oil futures settled just a cent higher at $15.33 a barrel, the middle of a $15.26/55 range.
''It's been terrible for the last few days, it so quiet,'' said Tom Bentz, a trader at Cresvale International in New York.
''There's just no momentum either way. People want to see if we break below $15 or back above $16. If we go below $15 we'll take out some 'stops' and go to $14.70 and lower; if we get back above $16 it'll confirm consolidation,'' he added.
Heating oil had a quiet day, settling 0.12 higher at 43.05 cents a gallon.
Some traders said the signals still point to further losses, on top of the more than 30 percent decline in crude seen in the last three months, bringing prices to 47-month lows this week.
''I think it is going to go lower; it looks that way in the charts and fundamentally,'' said Marcy Forsyth of Refco Energy Group.
There was little news Thursday to move prices while market players wait to see how next week's negotations between Iraq and the United Nations over how to raise its production to the new higher ceiling under the ''oil-for-food'' program.
Also, OPEC is holding an expanding Ministerial Monitoring Committee meeting on March 16, though the Secretariat failed to turn that into a full extraordinary ministerial meeting because of reluctance by some members, including Venezuela.
If Iraq and the U.N. agree a plan and OPEC fails to reach an agreement to curb production -- both expected results -- then the market should break lower, traders and analysts said.
Natural Gas
NYMEX Natural Gas Ends Down, April Breaks Key Support
NYMEX Hub natgas futures ended lower across the board Thursday in an active session, pressured by weaker physical prices and a flood of technical selling after April broke key support early, sources said.
April tumbled 8.7 cents to close at $2.141 per million British thermal units after dipping this afternoon to $2.12. May settled 8.3 cents lower at $2.18. Other months ended down 1.3 to 7.2 cents.
''Once April got through $2.19, it got crushed. The specs switched to the short side and the funds got flushed out. I don't know if $2.12 is going to hold,'' said one Midwest trader, adding an April break below $2.12 could take prices to $2.07.
Despite forecasts for cooler U.S. weather this week and next, traders said a huge storage overhang and the lack of any Arctic cold should make rallies difficult to sustain.
Technical traders said April's close today below key support at $2.19 turned sentiment more bearish, but after four consecutive down days, some expected a short covering bounce tomorrow ahead of the weekend.
Interim support was seen at $2.12, with next support pegged in the $2.06-2.07 area and then at the January low of $2.00.
Minor resistance was still expected in the $2.25 area, with major resistance at $2.355, followed by the February high of $2.43 and the contract high of $2.46.
Below-normal temperatures are forecast for the Midwest and southern plains this week and next. The Southeast is expected to stay slightly above normal, with the Mid-Atlantic varying on either side of normal for the period.
In the cash Thursday, Gulf Coast quotes slipped a nickel to about the $2.10 area. Midcon pipes were down the same amount to $2.05-2.10. Gas at the New York city gate also was five cents lower in the high-$2.30s, while Chicago gas lost a similar amount to the low-$2.20s.
The NYMEX 12-month Henry Hub strip fell five cents to $2.341. NYMEX said an estimated 81,516 Hub contracts traded, up sharply from Tuesday's revised tally of 36,056.
Separately, the New York Mercantile Exchange said it will lower its Henry Hub natgas margins as of the close of business Friday. Margins will drop to $2,200 from $2,800 for clearing members; to $2,420 from $3,080 for members; and to $2,970 from $3,780 for customers.
U.S. SPOT GAS
U.S. Spot Natural Gas Prices Continue Modest Slump
U.S. spot natural gas prices slipped a few cents across the board for the third consecutive session as industry players on Thursday sought bargains in the south power physical market, traders said.
''Power prices down in the South have gotten to a level where they (plant operators) can shut in gas units and buy power instead,'' said one industry source.
Cash and futures trading at the Henry Hub led the market lower. Henry Hub physicals traded within a broad range of about $2.09-2.16, with the bulk of activity centered at $2.11-2.12.
The natgas futures April contract broke through a key support level at $2.19 before finding fresh support at about $2.12.
In the western Texas market, Permian prices dipped two cents to about $2.05-2.07, while San Juan quotes were heard steady at $2.06-2.09.
Southern California border prices eased slightly to the mid-$2.30 range Thursday against the upper-$2.30s yesterday.
In the Midcontinent, prices slipped five cents to about $2.05-2.10, while Chicago city-gate was quoted equally softer at $2.16-2.24.
Meanwhile in the East, New York city gate prices drifted lower to the upper-$2.30s, while Appalachian prices on Columbia fell about four cents to $2.23-2.27.
Separately, traders basically shrugged off Wednesday's American Gas Association storage report, which showed a 47 bcf decline in inventories. A Reuters poll prior to the report showed most estimates fell within a range of 50-60 bcf.
CANADA SPOT GAS
Canadian Spot Natural Gas Prices Creep Higher In West
Canadian spot natural gas prices tacked on additional gains Thursday in the West as traders shied away from storage supplies and instead entered the spot market to meet demand, marketers said.
''No one's pulling gas out of storage. There's no reason to,'' a Calgary-based trader said.
Spot gas at the AECO storage hub in Alberta was quoted at C$1.725-1.73 per gigajoule (GJ), up about three cents from Wednesday's levels.
Meanwhile, both April and summer AECO were talked steady to firmer at C$1.70-1.72, while one-year business starting in November was reported at C$2.22-2.24 per GJ.
With temperatures in southern Alberta expected to remain a few degrees below freezing until this weekend, traders said they were not anticipating a sharp change in prices in the near term.
Keeping a lid on prices, traders said, was the ongoing maintenance on TransCanada PipeLines' mainline. The work, which was scheduled to last through March 27, is restricting about 156 million cubic feet a day of interruptible gas and thereby backing the supply into Alberta.
In the export market, prices at Sumas, Wash., were also quoted about four cents higher in a wide range of US$1.55-1.67 per million British thermal units (mmBtu) as colder-than-normal and snowy conditions continued in the U.S. Northwest.
Conversely in the East, gas at Niagara in southern Ontario was talked at US$2.31-2.36 per mmBtu, off about three cents from Wednesday.
Traders blamed the Niagara price drop on the gradual softening in the U.S. market and the decline in futures.
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