MARKET ACITIVITY/TRADING NOTES FOR DAY ENDING FRIDAY, APRIL 3, 1998 (2)
Oil Prices Up As Doubts Over OPEC Deal Ease
LONDON, April 3 - World oil prices firmed on Friday as traders warmed to an output deal aimed at trimming more than two percent of global supply from glutted markets.
World benchmark Brent blend crude oil closed 26 cents a barrel firmer at $14.43, extending gains made on Thursday.
''There is no major news to influence prices but it does appear as if sentiment is changing for the better,'' said Leslie Nicholas at brokers GNI in market comments.
An emergency Organisation of Petroleum Exporting Countries meeting that ended early on Tuesday approved a 1.245 million barrels per day (bpd) cartel contribution to a 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 aim is to mop up excess oil from flooded world markets and rescue prices from a 40 percent 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.
After the Vienna meeting ratified the deal prices fell on the suspicion that OPEC members would cheat on their commitments, as they have in the past.
But OPEC ministers pleaded for patience, arguing that prices would rise once production restraint worked its way into crude shipping schedules.
That message appears to have been heeded and Brent has risen, with some dealers expecting a trading range to be established either side of $15 a barrel.
''Markets rush to judge. The deal will take a bit of time to settle in,'' said Peter Gignoux, head of the energy desk at Salomon Smith Barney in London.
Customers of major Gulf exporters have already reported output cuts beginning to bite into export programmes, with incremental volumes that were previously available no longer on the market.
The deal was given an unexpected boost on Friday by China which cut 150,000 bpd from its output and by Norway, which passed a decree confirming its 100,000 bpd contribution to the 1.5 million bpd reduction.
Beijing's largest oil explorer has cut crude output in response to OPEC's cuts, China National United Oil Corp president Lin Qingshan told Reuters on Friday.
OPEC had not previously factored any Chinese contribution into its output reduction targets.
Norway's Oil and Energy ministry said its cuts would apply to 36 fields off Norway and would amount to a three percent cut in 1998 output from 3.2 million bpd to 3.1 million bpd.
Norway last curbed output in 1986, ordering all companies to pump oil at 10 percent below full capacity to help prices recover from lows around $10 a a barrel. Those restrictions were lifted in 1990.
Indonesian Mines and Energy minister Kuntoro Mangkusubroto predicted crude oil prices would rise to an average of $16 this year as a result of the cuts.
Warm winter weather in the northern hemisphere, growing Iraqi oil exports and a mistimed 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.
Rising Iraqi exports will counteract the impact of the cuts after the United Nations gave Baghdad approval to double existing sales.
But to boost exports Iraq says it needs $300 million for spare parts to repair its oil installations.
Oil Prices In Asia Up On Buying, Output Cuts
SINGAPORE, April 3 - Oil prices in Asia strengthened on Friday on some renewed buying and surprising news of output cuts by Asian producers.
May North Sea Brent blend crude futures on the Singapore International Monetary Exchange (SIMEX) traded 29 cents per barrel higher at $14.46 at 0815 GMT.
The contract closed 24 cents firmer at $14.17 on the International Petroleum Exchange (IPE) on Thursday.
Brokers said some buying interest had emerged as the bearish sentiment which took hold after OPEC confirmed cuts lower than expected was easing slightly.
News that China and Indonesia would both cut production from actual output provided an additional bullish factor in the market.
The president of China National United Oil Corp (CHINAOIL), Lin Qingshan, told Reuters on Friday that since April 1 China had cut oil output by 150,000 barrels per day (bpd) to 2.65 million bpd.
Indonesian Mines and Energy Minister Kuntoro Mangkusubroto also said on Friday his country would reduce output by 70,000 bpd from its production of 1.38 million bpd in support of the OPEC agreement to reduce world output.
He had said earlier the cuts would be from Indonesia's OPEC quota of 1.45 million bpd.
Indonesia Sees World Oil Prices Averaging $16/bbl
JAKARTA, April 3 - Indonesian Mines and Energy Minister Kuntoro Mangkusubroto predicted on Friday that world crude oil prices would average $16 per barrel this year as a result of an OPEC agreement to cut production.
He said he was convinced OPEC would implement its agreement on production cuts.
''It is predicted oil prices will rise to $16 per barrel from current levels on the agreement. I am confident oil prices will strengthen and will achieve an average of that level this year,'' Kuntoro told reporters.
Indonesia's 1998/99 budget assumes a crude oil price of $17 per barrel and Kuntoro said he would discuss the implication with the national planning board.
''The price has reached a very low level. I think all OPEC members feel very seriously about this. I feel all members will implement the agreement and the price will strengthen,'' he said.
An emergency Organisation of Petroleum Exporting Countries (OPEC) meeting that ended in the early hours of Tuesday approved a 1.245 million barrel per day (bpd) cartel contribution to a 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.
Kuntoro said Indonesia, Asia's only OPEC member, would produce 1.31 million bpd of crude oil from April, after a cut from its production of 1.38 million bpd.
''I will ask state oil company Pertamina to allocate 70,000 bpd of the cuts among our oil contractors,'' he said, speaking to reporters after returning from the OPEC meeting in Vienna.
''Indonesia feels that the agreement will lead to higher oil prices,'' he added.
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 NationalUnited 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.
NYMEX Oil Futures Prices Rise
NEW YORK (AP) Crude oil futures prices rose modestly on the New York
Mercantile Exchange after reports China pledged to join other world oil producers in restraining output to pump up crude prices.
China National Petroleum Corp. has sliced production by 5 percent, reducing output by about 150,000 barrels a day, according to an unidentified source quoted by Dow Jones Newswires.
China, according to the report, produces 2.8 million barrels a day onshore and 350,000 barrels a day offshore. The cutbacks were put in place on Wednesday, it said.
Earlier in the week, the 11-nation Organization of Petroleum Exporting Countries, along with several other producers, promised to reduce pumping by about 1.5 million barrels a day to bolster sagging prices.
China's pledge would bring the total amount of oil to be taken off the market to 1.654 million barrels a day slightly more than the minimum producers believe would be needed to support prices.
Still, analysts said the figure remains nearly 1.4 million barrels short of the amount that should be removed from the market to support prices over the long term.
May crude oil rose 25 cents, or 1.5 percent, to $15.99 a barrel. May heating oil rose .75 cent to 43.97 cents a gallon; May unleaded gasoline rose .59 cent to 51.76 cents a gallon.
US Cash Crudes - Little Change In Light Trading
NEW YORK, April 3 - U.S. spot crude differentials to the benchmark West Texas Intermediate/Cushing were flat at mid-day Friday, brokers and traders said.
Outright prices for cash cruces were up because of a 24-cent rise in the May NYMEX futures contract at 227 EST/1927 GMT to $15.98 per barrel. This caused a corresponding rise in the cash benchmark West Texas Intermediate/Cushing.
Trading was light, traders said.
There was no strong influence from fundamental news. NYMEX traders said the strength was caused by fundamental market reasons as well as an announcment by China to cut output by around 150,000 barrels per day.
An official with China National United Oil. Corp. on Friday said the voluntary move was in support of the 10 OPEC and five other non-OPEC nations seeking to shore up oil prices in the face of an oil glut. The cuts were to to into effect immediately, but the Chinese said longtime customers would probably not be affected.
With the exchange-for-premium (EFP) of eight cents to 10 cents, the cash crude benchmark West Texas Intermediate/Cushing was talked in a range of $16.05 to $16.10.
WTI/Cushing postings-plus was up a cent to $2.00/2.02 above WTI/Cushing.
The only U.S. crude experiencing price movement independent of the NYMEX was Light Louisiana Sweet/St. James, which was up about three cents, recouping most of the loss it experienced on Thursday.
LLS was done on Friday at a discount to WTI/Cushing of 65, 64 and 63 cents. On Thursday, it was done as low as 66 cents below WTI/Cushing and bid as low as 70 cents below. Traders offered no particular reason for the slightly stronger LLS on Friday.
West Texas Intermediate/Midland was unchanged on Friday morning at minus 39 cents to minus 35 cents to WTI/Cushing. West Texas Sour/Midland on Friday morning was unchanged, hugging a $2.30 discount to WTI/Cushing. A June WTS deal was said done at -$2.11 to WTI/Cushing.
Heavy Louisiana Sweet/Empire also went unchanged in talk, pegged $1.22/1.15.
Offshore sour crudes Eugene Island (-$2.15/-2.05), Bonito (-$1.75/-1.55), Mars (-$4.20/-3.90) and Posiden (-$4.35/4.20) were also little changed.
NYMEX Natural Gas Ends Mixed, Fronts Off As Longs Exit
NEW YORK, April 3 - NYMEX Hub natural gas futures ended mixed Friday in a fairly active session, with front months pressured late by some light, pre-weekend profit-taking after some steep gains this week, industry sources said. May eased 0.6 cent to close at $2.556 per million British thermal units after trading Friday between $2.53 and $2.595. June settled 0.8 cent lower at $2.576. Other months ended mixed, with some late 1999 and year 2000 contracts up slightly.
''We saw a little bit of profit-taking before the close, but they couldn't break it down,'' one East Coast trader said. ''It was a very orderly session, and I'm still a bull.''
While eastern temperatures are expected to dip slightly below normal this week, traders said levels were not likely to be cool enough to stir much demand, and many had expected a profit-taking pullback before the weekend.
But with the weekend cash market unexpectedly firming Friday, few saw much more downside for paper near-term.
Gulf Coast quotes gained almost a dime Friday to near the $2.50 level. Midcon pipes were up more than a nickel to the high-$2.30s. Chicago citygate gas was seven or eight cents higher in the mid-to-high $2.50s, while New York jumped more than 10 cents to the mid-$2.70s.
Forecasts call for cooler weekend weather in the East and Midwest, with the return of slightly above-normal temperatures expected by Tuesday. Texas weather should average about normal for the seven-day period.
Chart traders, eyeing robust volume and sharp gains in open interest this week as prices moved higher, agreed the technical picture looked bullish though some remained concerned about the 19 percent jump in open interest in the last three sessions.
May resistance was still 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.
Interim May support lies at the previous contract high of $2.46, with further support seen at the $2.33 double bottom. Major buying was expected at the $2.135 recent low.
The NYMEX 12-month Henry Hub strip slipped 0.9 cent to $2.611. NYMEX said an estimated 63,079 Hub contracts traded, down from Thursday's revised tally of 100,343.
US Spot Natural Gas Prices Turn Stronger Ahead Of Weekend
NEW YORK, April 3 - U.S. spot natural gas prices moved five to 10 cents higher Friday amid continued strengthening in futures, market sources said.
Weather Services Corp forecasts are calling for a cooler weekend across the East and Midwest, with warmer weather expected to return by Tuesday.
Henry Hub swing gas traded mostly at $2.50-2.52, sources said, indicating a nine-cent gain from Thursday. But May futures still held about a seven-cent premium to cash.
In the Midcontinent, prices were up about seven cents to about $2.38, with Chicago city-gate values seen at $2.56-2.57.
In western Texas, Permian Basin prices tacked on about nine cents at $2.25-2.29, while San Juan prices were similarly talked firmer at $2.16-2.18.
In the Northeast, New York city-gate jumped into the low-to-mid $2.70s, while Appalachian values on Columbia were quoted at $2.66-2.67.
Tightening supply in the Northeast market was the outage at PECO Energy's 1,055 megawatt (MW) Limerick 1 nuclear unit in Pennsylvania and the anticipated Saturday shutdown of Baltimore Gas & Electric's 850 MW Calvert Cliffs nuclear unit 1 in Maryland.
Canadian Spot Natural Gas Prices Up Again Ahead Of Weekend
NEW YORK, April 3 - Canadian spot natural gas prices were still on the rise Friday as a shortage of supply continued to tighten the market, industry sources said.
Spot gas at the AECO storage hub in Alberta was quoted at C$2.21-2.22 per gigajoule (GJ), up about two cents from Thursday and 37 cents higher than week-ago levels.
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 gains to the mid-US$1.80s per million British thermal units (mmBtu), up 10 cents from Thursday's levels.
In the east, Niagara prices rose five cents to about US$2.68 per mmBtu, in line with continued firmness on NYMEX.
Despite reports of early storage injections, Canadian Gas Association data showed western gas stocks slipped to 75.12 bcf last week to 28.4 percent full, down from 31.8 percent a week earlier. Total Canadian gas stocks were also lower at 157.29 bcf, or 31.7 percent full.
|
