MARKET ACITIVITY/TRADING NOTES FOR DAY ENDING THURSDAY, APRIL 2, 1998 (1)
OIL & GAS
Oil Prices Rebound After Initial OPEC Doubts
LONDON, April 2 - World oil prices firmed on Thursday in a corrective bounce after sharp losses in the immediate aftermath of OPEC's deal to cut output.
But traders said turbulence, in the wake of a pact to trim more than two percent from world supply, was beginning to subside as the market established a new trading range.
World benchmark Brent crude oil closed up 26 cents a barrel at $14.19 but was still floundering more than a dollar below levels seen before the OPEC cuts.
"I think we are now just settling into a new range," said Scott Carter, senior oil trader at Tosco Petroleum in London.
An emergency Organisation of Petroleum Exporting Countries meeting that ended early on Tuesday approved a 1.245 million barrel per day (bpd) cartel contribution to an overall two percent cut in global output.
Other cuts will come from non-OPEC Norway, Mexico, Egypt, Oman and Yemen, which have pledged to trim 270,000 bpd for a total of 1.5 million bpd in overall promised reductions.
The objective is to rescue oil from a 40 percent price slide that took Brent to a nine-year low of $11.90 a barrel recently.
The cuts achieved their goal in the days after they were first mapped out at a secret meeting in Riyadh between Saudi Arabia, Venezuela and Mexico, boosting levels by some $3 a barrel.
But scepticism that the cuts would not be enough to mop up glutted oil markets persist, traders said.
After their meeting, OPEC ministers pleaded for patience, arguing that prices would rise once production restraint worked its way into crude shipping schedules.
"The market should judge the OPEC decision in two months," Saudi Arabian oil minister Ali al-Naimi said earlier this week.
Warm winter weather, growing Iraqi oil exports and a mis-timed OPEC move in November to hike output by 10 percent were responsible for the slide from last year's average Brent price of $19.32 a barrel.
Dresdner Kleinwort Benson said in market comments titled "OPEC: Back from the precipice" that the attempt to prop up prices "has come not a moment too soon."
"Without such measures prices could well have entered single digits by mid-year. However, oil prices are unlikely to return to 1997 levels," it said.
Rising Iraqi exports will counteract the impact of the cuts after Baghdad won United Nations approval to double existing sales under the oil for food programme which allows the sanctions hit country to buy essential supplies.
But Iraq says it needs $300 million for spare parts to repair its ailing oil industry before it can boost exports. Prices in dollars per barrel:
Late U.S. Energy Prices Rise On Corrective Bounce
LOS ANGELES, April 2 - U.S. energy futures edged up late Thursday on a corrective bounced that brought prices back from a two-day decline, traders said.
Crude oil prices on ACCESS, the overnight market run by the New York Mercantile Exchange (NYMEX), extended late daytime gains, which lifted the May contract 20 cents a barrel to $15.74.
''(ACCESS) is up slightly because we came off very heavy in the marketplace,'' in recent days, an New York-based trader said.
"It's local short covering," on Thursday, he added.
Crude oil for May traded at $15.82 a barrel by 1400 PST on ACCESS, a eight cent-rise from the NYMEX settlem, traders said.
Roughly 683 crude oil lots changed hands early in the market, with May volume around 427.
ACCESS prices for May unleaded gasoline traded at 51.30 cents a gallon, up 0.23 cent from the daytime close. Gasoline retreated 0.10 a gallon in daytime markets.
Heating oil trade was idle on ACCESS after finishing the day at 43.22 cent a gallon, a 0.40 cent-rise on the day.
US Cash Crudes - Diffs For LLS, WTS, HLS Weaken
NEW YORK, April 2 - U.S. spot crude oil differentials weakened Thursday morning as traders again talked of a lack of storage for an already oversupplied domestic crude oil market.
Outright prices fluctuated on Thursday morning because of the NYMEX futures market and its impact on the cash benchmark West Texas Intermediate/Cushing. The May crude oil contract on the NYMEX traded as high as $15.80 although for most of the morning hovered around $15.70 a barrel.
At 1132 EST/1632 EST, the May crude contract was at $15.66, up 12 cents from Wednesday's settle of $15.54.
There was no dramatic news affecting the domestic cash crude market on Thursday morning. In general, though, traders and brokers said lack of storage space is keeping differentials from rebounding.
With the exchange-for-premium (EFP) of 10 cents, WTI/Cushing was talked in a range of $15.73 to $15.79.
West Texas Sour/Midland on Thursday morning was reported done at a $2.30 discount to WTI/Cushing, down three cents from Wednesday afternoon. WTS was talked in a range of $2.33/2.28 below WTI/Cushing.
Light Louisiana Sweet/St. James was done progressively lower Thursday morning, from 61 to 62 and finally 65 cents under WTI/Cushing.
In the wake of the LLS slide, Heavy Louisiana Sweet/Empire also fell, about five cents, to be pegged at -$1.25/-1.18.
WTI postings-plus was unchanged from Wednesday, talked a cent either side of $2.00 above WTI/Cushing.
WTI/Midland, unchanged, was talked at -39/-37.
Offshore Eugene Island crude oil was also a little weaker, following WTS, at -$2.10/-2.00.
NYMEX Hub Natural Gas Ends uUp, May Again Hits New High
NEW YORK, April 2 - NYMEX Hub natural gas futures ended higher across the board Thursday in another active session, with front months again driven to new highs by atechnical rally after support held early, market sources said.
May climbed 6.1 cents to close at $2.562 per million British thermal units after reaching a new high today of $2.605. June, which also hit a new benchmark of $2.625, settled 5.1 cents higher at $2.584. Other months ended up 0.9 to 4.9 cents.
''The mid-$2.60s (basis May) looks like the next target now. The funds got long last week and are still driving it. I don't see us coming off much,'' said one Texas-based trader.
While demand typically fades in the spring shoulder period, traders said growing concerns about coal supplies and forecasts for a hot summer should limit any pullbacks near-term.
Forecasts into early next week call for seasonal to slightly below seasonal weather in the East and Midwest, but levels are expected to return to normal by midweek next week. Texas temperatures should range from several to 10 degrees F above normal for the period.
Technical traders noted May held interim support this morning at the previous contract high of $2.46, which triggered the short covering and new buying that again drove the spot month to a series of new highs. Further support was seen at the $2.33 double bottom. Major buying was expected at the $2.135 recent low.
May resistance was now seen at the 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.
In the cash Thursday, Gulf Coast swing quotes dipped almost a dime early to the low-$2.30s, then recovered to the high-$2.30s, off two to three cents on the day. Midcon pipes slipped seven or eight cents early to about $2.30, then recovered slightly to the low-$2.30s, still off about a nickel. Chicago city gate gas sold early at $2.48, then rebounded to the low-$2.50s, down several cents. New York was about three cents lower in the low-$2.60s.
The NYMEX 12-month Henry Hub strip gained 3.9 cents to $2.62. NYMEX total estimated Henry Hub volumes were not available at 1610 EST, but 72,006 lots had changed hands by 1310 EST.
U.S. Spot Natural Gas Prices Drop In Volatile Session
NEW YORK, April 2 - U.S. spot natural gas prices showed a net decline Thursday following a volatile trading session, with storage injection demand conflicting with a weak weather-related demand, market sources said. Forecasts were calling for more seasonal weather in the East and Midwest, with temperatures expected to slip to five to seven degrees below normal this weekend in the Mid-Atlantic region. By early next week, however, temperatures are expected to return to normal to above normal levels across most of the U.S.
Henry Hub swing gas traded anywhere from the mid-$2.30s to the high-$2.40s, sources said, with most business reported done at $2.40-2.45.
In the Midcontinent, prices were off an average of seven cents to about $2.30-2.31, while Chicago city-gate values slipped into the low-$2.50s.
In western Texas, Permian Basin prices slid eight cents to about $2.17-2.20 as below normal temperatures continued in the Southwest. San Juan prices were similarly talked lower at $2.09-2.12. In the Northeast, New York city-gate prices dropped into the low-to-mid $2.60s, while Appalachian values on Columbia were quoted at $2.546-2.57.
Meanwhile, AGA said Wednesday that U.S. gas stocks fell last week by 20 bcf, slipping to 175 bcf, or 21.1 percent, above a year-ago.
Canadian Spot Natural Gas Prices Stretch Higher Again
NEW YORK, April 2 - Canadian spot natural gas prices staged another rally Thursday as waning available supplies continued to put upward pressure on prices, industry sources said.
Spot gas at the AECO storage hub in Alberta was quoted at C$2.20 per gigajoule (GJ), up about 15 cents from Wednesday.
May AECO was also talked firmer at C$2.13-2.14 per GJ, while one-year business was reported done at C$2.38-2.39.
''They're still worried about supply, and we're into maintenance periods,'' one Calgary-based trader said, noting linepack on NOVA's western gas system was about 400 million cubic feet per day behind target.
Meanwhile, temperatures in southern Alberta were forecast to reach seasonal highs of about four to five degrees Celsius over the next few days.
In the export markets, prices at Sumas, Wash., also extended their lead to the low-US$1.70s per million British thermal units (mmBtu) on supply shortfalls and continued below-normal temperatures in the West.
In the east, Niagara pricing remained steady at US$2.60-2.65 per mmBtu.
TOP STORIES
China Cuts Crude Oil Output In Response To OPEC Cuts
BEIJING, April 3 - China has cut crude oil output by 150,000 barrels
per day (bpd) in response to OPEC production cuts, the president of China National United Oil Corp (CHINAOIL), said on Friday.
Lin Qingshan said the cut of around 5.0 percent, effective on April 1, had reduced output to 2.65 million bpd from 2.8 million bpd.
Lin said the decision to cut production was taken by the China National Petroleum Corp (CNPC), the country's largest oil explorer and a major shareholder in CHINAOIL. CHINAOIL conducts overseas trade on behalf of
CNPC.
''CNPC highly praises the decision by OPEC members to cut oil production,'' Lin told Reuters in an interview.
''But it's hard to say whether this will have a stabilising effect on world oil prices,'' he said.
An emergency OPEC meeting that ended early on Tuesday approved a 1.245
million bpd cartel contribution to an overall two percent cut in global output aimed at halting a dramatic price slide.
Before China announced its cuts, five non-OPEC producers -- Norway,
Mexico, Egypt, Oman and Yemen -- had pledged to trim 270,000 bpd.
Traders have voiced scepticism that the cuts would not be enough to mop up glutted oil markets.
OPEC ministers have pleaded for patience, arguing that prices would rise once production restraint worked its way into crude shipping schedules.
Lin stressed that the output cut was a voluntary decision by CNPC aimed at ''supporting, stabilising and raising'' world crude oil prices.
''It was a voluntary decision to support OPEC's measures,'' he said.
''CNPC wants to show that it has a sense of responsibility to the world market.''
Analysts said the move would likely be well received by fellow oil producers and would also help China's domestic markets.
Lin said: ''I think imports will increase,'' but he gave no details.
''It will especially affect exports,'' he said, adding that could not put a figure to the reduction in oil exports.
China imported 4.94 million tonnes of crude oil in the first two months of 1998, up 24.2 percent compared with the year-ago period. Exports during the period fell a year-on-year 8.8 percent to 2.58 million tonnes, according to customs figures.
Lin said China would seek to soften the impact on long-term clients, such as Japanese government agencies.
''As far as our long-term clients are concerned, we will give them priority consideration,'' he said.
He declined to speculate how long the cuts would last. But he said: ''It's not a short-term phenomenon.''
The move would particularly affect the Daqing, Shengli and Liaohe oil fields in northern and northeastern China, he said.
He said a glut of diesel had already prompted a reduction in crude output. He estimated the reduction totalled 4.0 million barrels in the first three months of this year.
CNPC had earlier unveiled a 1998 crude oil output target of 143 million tonnes, slightly below the 1997 production figure of 143.2 million tonnes.
Oil Burns A Bit Brighter
Prices appear to be finding new levels as markets
adjust to OPEC supply cut
World oil prices firmed on Thursday, correcting for sharp losses earlier in the week after dealers showed little confidence in OPEC's decision to cut global output.
Traders said turbulence resulting from the pact to trim more than 2 percent of world supply was beginning to subside as the market established a new trading range.
"I think we are now just settling into a new range," said Scott Carter, senior oil trader at Tosco Petroleum in London.
An emergency meeting of the Organization of the Petroleum Exporting Countries (OPEC) that ended early on Tuesday approved a 1.245 million barrels per day (bpd) overall cartel slowdown in production.
Other cuts will come from non-OPEC countries Norway, Mexico, Egypt, Oman and Yemen, which have pledged to trim a total 270,000 bpd, bringing the overall reductions promised to 1.5 million bpd.
The objective is to rescue oil from a 40 percent price slide that took Brent to a nine-year low of $11.90 a barrel recently.
The cuts achieved their goal in the days after they were first mapped out at a secret meeting in Riyadh between Saudi Arabia, Venezuela and Mexico, boosting levels by some $3.
But skepticism persists that the cuts would not be enough to mop up glutted oil markets, traders said.
After their meeting, OPEC ministers pleaded for patience, arguing that prices would rise once production restraint worked its way into crude shipping schedules.
"The market should judge the OPEC decision in two months," said Saudi
Arabian Oil Minister Ali al-Naimi earlier this week.
Warm winter weather, growing Iraqi oil exports and a poorly timed OPEC
move in November to hike output by 10 percent were responsible for the slide from last year's average Brent price of $19.32 a barrel.
Dresdner Kleinwort Benson said in market comments that the attempt to prop up prices "has come not a moment too soon. . . . Without such measures prices could well have entered single digits by mid-year. However, oil prices are unlikely to return to 1997 levels."
Rising Iraqi exports will counteract the impact of the cuts, but Iraq says it needs $300 million for spare parts to repair its ailing oil industry before it can boost exports.
Ipe Volumes of Trade Soar to Record Highs in March
LONDON (April 2) - Volumes of trade on the London International Petroleum Exchange (IPE) reached the highest levels ever recorded last month, said the IPE Thursday.
It said that exchange volumes as a whole rose to an average of 83,380 lots a day over the month, which represents an average daily volume of more than 75 million barrels of oil and 28 million therms of natural gas.
Individual contracts also set new records. The Brent Crude futures contract traded an average of just under 60,000 lots a day, peaking a 101,776 lots on 23 March, breaking the previous daily record of 95,659 lots set in January 1996.
Natural Gas futures volumes also rose. The daily average reached a new high of just under 950 lots, equivalent to about 40 percent of UK consumption.
Lynton Jones, chief executive of the IPE, said: "So far this year has proved an exceptional one in terms of the volumes of trade. Increased price volatility has reinforced to producers and consumers alike the benefits of risk management".
He added, "The boom in volumes has also coincided with an upturn in interest from companies and individuals in trading on the IPE which is a further sign of confidence in the Exchange".
Natural Gas Soars on Weather
Associated Press
Natural gas futures prices rose sharply Thursday on the New York Mercantile Exchange amid fears El Nino will cause a hot, uncomfortable summer across much of the country, boosting cooling demand.
On other markets, silver futures surged, while grain and soybean futures bounced higher.
Natural gas futures in recent days have been quietly moving in the opposite direction of other falling energy futures prices.
Natural gas, which is used to heat homes, also is used by utilities to generate electricity. Some forecasters are predicting much of the eastern half of the country this spring and summer will experience temperatures sharply above normal.
Record temperatures last week across much of the eastern seaboard touched off renewed speculation about the outlook for natural gas usage. Market participants noted the El Nino weather pattern to which many attribute a relatively mild winter often is followed by a hotter-than-normal summer.
Natural gas for May delivery settled 6.1 cents higher at $2.561 for each 1,000 cubic feet. The contract earlier reached the highest level since Dec. 4.
Most other energy futures also moved higher in consolidation after several days of losses tied to expectations that a world oil glut will continue.
May crude rose 20 cents to $15.74 a barrel; May unleaded gasoline fell 0.1 cent to 51.17 cents a gallon; May heating oil rose 0.4 cent to 43.22 cents a gallon.
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