MARKET ACITIVITY/TRADING NOTES FOR DAY ENDING WEDNESDAY, APRIL 8, 1998 (2)
OIL & GAS
World Oil Prices Jump On U.S. Oil Stock Data
LONDON, April 8 - Oil futures recovered in late trade on Wednesday after two days of falling prices, with a report showing lower than expected U.S. crude oil stocks helping dealers regain some confidence.
Benchmark Brent blend for May delivery last traded at $14.00 a barrel, up 30 cents on the day. In the last 30 minutes of business it peaked at $14.12 before retracing lower.
The levels were almost two dollars down on Brent's peak last week of $15.82 following an announcement of production cuts by oil cartel OPEC.
Traders who have sold crude lower say they have yet to see firm evidence of reductions by the Organisation of the Petroleum Exporting Countries.
OPEC members, aiming to drain excess crude from a glutted market, agreed to cut production by 1.245 million barrels per day from April 1 to the end of 1998.
Data from the American Petroleum Institute (API) showing a crude stock draw of 415,000 barrels for the week ending April 3 confounded many forecasters' expectations and pushed prices upwards.
Department of Energy figures released on Wednesday showing a 1.5 million barrel build-up in the last week stifled Brent gains.
But traders later focused on the 4.0 million barrel dip in gasoline stocks, the key petroleum product in the summer when demand from vacationing U.S. drivers is high, and pushed prices upwards.
Producers have seen Brent average a disastrous $4.50 a barrel less so far this year than in 1997, cutting export earnings for OPEC member countries by some $8 billion in the first quarter of 1998.
Oil exporters outside the cartel led by Mexico and Norway have joined forces with OPEC in pledging an additional 400,000 bpd in cuts, helped by unexpected cooperation from China.
And Russia offered its support on Wednesday by announcing it intended to cut its oil exports by 61,000 bpd, amounting to 2.3 percent of its export volume.
Russia To Cut Oil Exports
MOSCOW, April 8 (UPI) - Russia says it will cut oil exports by 61,000 barrels a day to help support sagging oil prices.
Russian First Deputy Prime Minister Boris Nemtsov (''nehm-TSAWF'') says petroleum product exports from Russia would be cut by 4,900 tons a day.
A government spokesman says the move is purely political, adding that Russia would ''watch for reaction from OPEC members.''
Oil analysts in Moscow tell United Press International the cut is largely a political gesture of support for stable, higher world prices, and would not significantly dent Russia's export revenues.
Russia, which is not a member of the Organization of Petroleum Exporting Countries, is a major world exporter of oil and relies on oil sales for a large part of its income.
Nemtsov has voiced his concern with falling oil prices in the past, and has invited OPEC officials to visit Moscow this month for talks on a coordinated move to boost prices, possibly by cutting production.
Russia's Itar-Tass news agency says the government estimates it is losing as much as $24 million a day in revenues because of the oil price slump.
NYMEX Crude, Products End Up On Short-Covering
NEW YORK, April 8 - NYMEX futures on crude oil and refined products ended on an upbeat after a short covering rally towards the close lifted prices, mostly influenced by by bullish inventory data on gasoline.
The May crude contract gained 33 cents, finishing at $15.55 a barrel, off the day's high of $15.68, on moderate volume.
May gasoline extended its gains to 50.44 cents a gallon, up 0.86 cent, trading below the day's high of 50.80 cents.
May heating oil, taking the cue from gasoline, rose .74 cent at 43.20 cents a gallon.
''The unexpected draw in gasoline stocks fueled trading today,'' said Gerald Samuels of New York's Arb Oil, adding that traders went on short-covering, on light volume.
The Department of Energy reported early Wednesday a draw in U.S. gasoline stocks by 4.0 million barrels for the week ending April 3.
That was double the 1.956 million barrel draw reported by the American Petroleum Institute late Tuesday, which was in line with forecasters' expectations. The API draw sparked a small rise in crude and refined products in overnight ACCESS trading.
Michael Busby, a trader at Northville Industries, noted, that the inventory data supported the market ''but there was was actually no other news to spur trading.''
''You would wish (the inventory data) were more dramatic than what they were,'' he quipped.
The market turned upside after hitting the day's low at $15.16, developing some support after two days of lingering below $15.50.
The API and DOE data on crude oil inventory were conflicting, with the API reporting a draw of 415,000 barrels and DOE a build of 1.5 million barrels.
The moderate DOE build on crude was near the 2.0 million barrel build that traders and analysts expected and so hardly affected trading, market players said.
Traders said there was little or no effect of news that Russia's major oil companies and the government have struck a surprise deal on Wednesday to cut crude exports by 2.3 percent and product exports by 3.2 percent in response to low world prices.
A senior government source told Reuters that whether or not the cuts went ahead would largely depend on steps taken by OPEC members to reduce exports.
The Russian cuts, 61,000 barrels per day for crude and 4,900 bpd for products ''were too small,'' to affect trading, said Energex Ltd trader Dominick Cagliotti.
OPEC producers have agreed to cut their production by 1.245 million bpd while non-OPEC producers will reduce output by about 270,000 as a way to rescue slumping oil prices.
In addition, China announced it had cut production by about 150,000 bpd.
US Cash Crudes - WTS Strengthens Then Falls Back
NEW YORK, April 8 - West Texas Sour/Midland differentials on Wednesday were about seven cents stronger, mostly based on the month delay in accepting bids for the sale of sour crude from the U.S. Strategic Petroleum Reserve, traderes and brokers said.
U.S. Department of Energy Secretary Frederico Pena on Wednesday said he didn't wish to see the sale of 207.5 million barrels of oil from the SPR, which was mandated last year by Congress at a time when oil prices were about 50-percent higher.
As differentials for WTS/Midland dropped, outright prices for all cash crudes in the U.S. rose as a result of the 33-cent increase in the value of the NYMEX front-month futures contract.
The NYMEX rose as a result of short-covering, traders said.
The May crude NYMEX contract settled Wednesday at $15.55 per barrel.
With the premium to guarantee delivery of domestic crudes, WTI/Cushing was talked in a range of $15.61 to $15.66 per barrel. The exchange for physical (EFP) premium was talked at seven- to nine-cents.
WTS/Midland was done as high as $2.20 under WTI/Cushing Wednesday, but pulled back to end the day offered at $2.26 below WTI/Cushing and bid at -$2.30.
The last deal reported done for WTS/Midland was -$2.28.
WTI/postings-plus dropped to a couple of cents to $1.94/1.97 over WTI/Cushing. Light Louisiana Sweet/St. James, which weakened on Tuesday, was unchanged and pegged around 70 cents below WTI/Cushing.
West Texas Intermediate/Midland was unchanged at -39/-37 cents, and done at -38 cents.
Heavy Louisiana Sweet/Empire was also unchanged, at -$1.27/-$1.22.
Offshore Eugene Island was also unchanged, at minus $2.10 to minus $2.05.
NYMEX Hub Natural Gas Ends Up, ACCESS Loses After AGAs
NEW YORK, April 8 - NYMEX Hub natural gas futures ended higher across the board Wednesday in a fairly active session, then slipped in after hours trade following an unexpectedly-large weekly inventory build, sources said.
In the day session, May gained 2.1 cents to close at $2.689 per million British thermal units after climbing early to another contract high of $2.725. On ACCESS, the spot month dipped to $2.641 shortly after the AGA report, then quickly recovered to the $2.66-2.67 area. June, which also hit a new benchmark today of $2.75, settled 2.4 cents higher at $2.718. Other months ended up by 1.3 to 2.4 cents.
''It (the AGA number) was a lot higher than most people expected and the market sold off on it, but it's coming right back,'' said one East Coast trader, noting the market was technically overbought and due for a pullback, particularly with open interest at near-record levels.
AGA said Wednesday that U.S. gas stocks rose last week by 53 bcf, well above Reuter poll estimates in the 10-20 bcf range. Overall stocks climbed to 207 bcf, or 24 percent, above last year.
Eastern stocks a week ago rose 36 bcf and climbed to 39 percent above last year. Consuming region west storage, which fell 11 bcf last week, slipped to two percent below 1997 levels. Inventories in the producing region gained 28 bcf for the week and edged up to 21 percent over year-ago.
Forecasts this week still call for slightly below-normal temperatures in the East before moderating to several degrees F above normal early next week. Texas is expected to average several degrees F above normal for the period, while the Midcontinent should warm from slightly below normal to as much as 15 degrees above later in the week.
Technically, May resistance was now seen at today's high of $2.725 and then in the $2.78 area, a measurement objective from the recent leg up. Further selling should emerge at $2.812, a prominent spot continuation high from December.
Interim May support lies at $2.605 and $2.46, both previous contract highs, with further support seen at the $2.33 double bottom. Major buying was expected at the $2.135 recent low.
In the cash Wednesday, Gulf Coast swing quotes jumped more than a dime to the low-$2.60s. Midcon pipes surged more than 15 cents to the low-to-mid $2.50s. Chicago city gate gas firmed more than 10 cents to about $2.70, while New York saw similar gains to the mid-to-high $2.80s.
The NYMEX 12-month Henry Hub strip gained two cents to $2.723. NYMEX said an estimated 78,492 Hub contracts traded, down slightly from Tuesday's revised tally of 81,085.
NYMEX will be closed Friday for the Good Friday holiday.
U.S. Spot Natural Gas Prices Surge After NYMEX Rally
NEW YORK, April 8 - U.S. spot natural gas prices gained more than 10 cents Wednesday following a sharp incline in May futures on Tuesday, traders said. After setting new highs on Tuesday, NYMEX's May contract soared to another new high of $2.725 today. However, some traders speculated that cash prices may be on the retreat Thursday after a downward move in futures this afternoon and an anticipated drop in demand over the holiday weekend.
Henry Hub swing gas traded mostly in the mid-$2.60s, up about 15 cents from Tuesday.
Similarly in the Midcontinent, prices jumped 16 cents to the $2.50s in active trade. A volatile trading session on Northern resulted in Demarcation prices ranging anywhere from $2.38 to $2.68, with most business reported done in the low-to-mid $2.50s.
Chicago city-gate values were also seen much higher around $2.70.
In the West, southern California border prices surged more than 20 cents to the high-$2.60s, propped up in part by an operational flow order (OFO) in northern California, sources said.
Permian Basin prices were also higher at $2.44-2.47, while San Juan prices were talked mostly at $2.35-2.39.
In the Northeast, New York city-gate prices tacked on about 10 cents to the mid-$2.80s, while Appalachian values on Columbia were quoted at $2.75-2.79.
Separately, estimates for today's American Gas Association storage report ranged from a draw of 12 bcf to a build of 50 bcf, with most seen at plus 10-20 bcf.
Forecasts are calling for cooler weather later this week in the Midwest and East. But another warming trend is expected to follow on Sunday and Monday, with temperatures seen at eight to 15 degrees above normal in the Chicago area.
Canadian Spot Natural Gas Rises On Tight Supply, NYMEX
NEW YORK, April 8 - Canadian spot natural gas prices swelled Wednesday as threats of short supply grew and additional market strength filtered in from Tuesday's rally in NYMEX's May futures, industry sources said.
Spot gas at the AECO storage hub in Alberta was quoted higher again at C$2.30 per gigajoule (GJ) from about C$2.22-2.24 on Tuesday. May AECO was talked at C$2.26-2.28.
Winter business was also reported done firmer at C$2.75-2.77 from C$2.68, while one-year prices jumped to about C$2.53-2.55 from C$2.40 per GJ.
About 145 million cubic feet per day (mmcfd) of gas was injected into western storage on Tuesday, down slightly from about 150 mmcfd on Monday.
But storage injections are lagging, one Calgary-based trader said.
''They need to put in about 600 million (cubic feet) each day to refill storage in time for withdrawal season,'' he said, noting the withdrawal season typically begins Oct 31.
This is also in conjunction with NOVA Gas Transmission's announcement on Tuesday that the pipeline may be short supply this summer by about 400-500 mmcfd.
In the export markets, prices at Sumas, Wash., jumped seven cents to the mid-to-high US$1.80s per million British thermal units (mmBtu).
In the east, Niagara prices rebounded to about US$2.75-2.83 per mmBtu, up about 15 cents from Tuesday's levels, following May futures' rally to new highs. |
