MARKET ACITIVITY/TRADING NOTES FOR DAY ENDING WEDNESDAY, APRIL 15, 1998 (3)
OIL & GAS
U.S. March Oil Demand Up 3.8 Pct From Year Ago
WASHINGTON, April 15 - U.S. petroleum demand in March jumped 3.8 pct from a year ago to 18.555 million barrels per day, boosted by the robust economy, lower gasoline prices and greater personal income, the American Petroleum Institute said Wednesday.
In its monthly statistical report, the API said March deliveries of gasoline -- a key indicator of demand -- rose 2.5 percent from a year ago to average 8.000 million bpd. For the year's first quarter, gasoline deliveries jumped 2.8 percent to average 7.800 million bpd, the biggest quarterly rise since 1995.
Overall petroleum deliveries for the year's first quarter were up 1.4 percent from a year ago, and averaged 18.504 million bpd.
Distillate deliveries rose by 2.6 percent in March from a year ago to average 3.608 million bpd, buoyed by underlying growth in transportation demand that was just slightly offset by a decrease in heating oil demand caused by warmer weather.
Iraq Unable to Pump As Much Oil A UN Allows
UNITED NATIONS, April 16 - U.N. Secretary-General Kofi Annan has proposed Iraq be allowed to import $300 million in equipment to upgrade its dilapidated oil industry, according to a report to the Security Council on Thursday.
But Annan said that even if emergency repairs were carried out Baghdad could export only $3 billion worth of oil over any six months in 1998, far less than the $5.256 billion authorized by the Security Council under the "oil-for-food" program.
The council's figure, which more than doubled the previous $2 billion in oil Baghdad was allowed to sell over six months, was prompted by the plight of ordinary Iraqis suffering under the impact of punishing sanctions.
The oil-for-food deal is an exception to the embargoes imposed in August 1990 after Iraq invaded Kuwait.
Annan recommended the Security Council lower its Iraqi oil export allowance to $4 billion, beginning in June and ending in December, and review the sum again later in the year, depending on the arrival of the needed equipment.
The Security Council had asked Annan to conduct the analysis and said it would consider implementing his recommendations. Iraq currently can only import humanitarian goods, not oil equipment.
Annan based his report on a survey by the Dutch firm Saybolt which monitors Iraq's oil industry for the United Nations. It said Baghdad's petroleum facilities, infrastructure and transport were in a "lamentable state."
The oil experts doubted that Iraq's own estimate or "production profile" of 3 million barrels per day could be met any time this year and probably not next year either.
"Should the current average price of $10.50 per barrel for Iraqi crude remain unchanged, based on the existing export capacity of 1.6 million barrels per day, revenues only in the amount of $3 billion could be achieved during a 180-day period, starting in June 1998, provided the spare parts required are ordered immediately," the report said.
In the next six month period, beginning in December 1998, Iraq could export 1.7 million barrels a day, generating $3.9 billion but based on a price of $12.50 per barrel, it said.
The experts, Annan said, agreed with Iraq's oil ministry that Baghdad needed $300 million for spare parts. But he said this sum reflected "only the most essential and urgent needs of the Iraqi oil industry."
Iraq last week was exporting crude at a rate of about 1.57 million barrels per day (bpd), which would generate just under $3 billion in revenues over 180 days at current prices.
To reach $5.256 billion, Iraq would have to boost exports to about 2.8 million bpd at current prices, a level it has not reached since before its war with Iran in 1980.
"The oil processing and treatment facilities, refineries and storage terminals in the country have been severely damaged and continue to deteriorate," the report said.
"This deterioration, particularly in the oil fields, will accelerate until significant action is taken to contain and relieve the problems," it added.
"Without rapid and adequate investment in spare parts, and repairs ... plus the development of a number of smaller fields, the gap between the existing decline curve and the projected increment in crude oil production will grow wider for each month that financing is delayed," the report concluded.
Oil Claws Back Losses On Venezuela Pledge
LONDON, April 15 - World oil prices struggled higher on Wednesday as Venezuela's reassurance of its commitment to cut production bolstered sagging markets.
Benchmark Brent blend crude futures for June loading traded 30 cents higher at $14.20 a barrel by 1625 GMT.
Prices were boosted by Luis Giusti, president of state oil company Petroleos de Venezuela (PDVSA) that Caracas' oil exports will average 3.09 million barrels per day (bpd) in 1998.
Giusti's announcement eased traders' doubts over Venezuela's resolve in implementing the 200,000 bpd production cut it pledged in a recent multinational producers pact.
''The (Venezuela) headline wasn't any real news but I suppose (Guisti) was just trying to reiterate that the deal will make a difference,'' said one dealer.
Giusti's announcement was offset by a the latest weekly American Petroleum Institute (API) figures which revealed that U.S. crude stocks jumped by 6.5 million barrels.
The API data, a leading indicator of inventory patterns in the world's biggest importer, also showed a hefty gain in distillate stocks.
World petroleum stocks are already brimming over after this year's rare first quarter inventory build.
The glut of oil in storage is tethering world oil prices despite the production cuts pledged by world producers aimed at bolstering revenues.
International benchmark Brent is now less than $1.50 above nine-year lows scraped before Saudi Arabia, Mexico and Venezuela's March 22 pact to cut output.
Some 16 oil producers ultimately joined the pact, which should shave some 1.5 million barrels a day (bpd) from the 75 million bpd global market if pledges are honoured.
The deal linked 10 members of the Organisation of the Petroleum Exporting Countries (OPEC) with key producers from outside the group, chiefly Norway and Mexico.
But dealers are choosing to wait for confirmation that cuts are actually being implemented, wary after OPEC members' history of pumping above agreed production quotas.
The new API data did provide some hope for beleaguered oil producers, showing that U.S. total oil consumption in March jumped 3.8 percent from last year.
And demand in the key U.S. gasoline market was up 2.5 percent.
The robust economy, lower gasoline prices and gains in personal income combinined to spur higher demand, said the API.
The U.S. Department of Energy has predicted that this summer's U.S. driving season should post the biggest demand gains in a decade.
NYMEX Crude, Products End Up On Gasoline-Led Rally
NEW YORK, April 15 - A gasoline-led rally sparked NYMEX crude and refined products Wednesday on news that Venezuela would stick to its committed production cap and worries over a series of actual and rumored glitches in U.S. refineries, traders said.
The market shook off the bears early from government and industry reports showing a fairly strong build in crude and turned to gasoline to fuel trading.
Gasoline lifted the whole petroleum complex for most of the day. It settled the May contract with a gain of 1.40 cents at 51.45 cents a gallon.
May crude rose to a high of $15.60 a barrel, rising from a low of $15.02 struck at the opening, and settling 34 cents higher from Tuesday's close.
May heating oil went with the flow and ended 1.08 cents higher at 43.62 cents a gallon.
Traders said technical short-covering predominated the day's trading strategies.
Cyrus Tahmassebi, an analyst who tracks long-term market signals at Maryland-based Energy Trends Inc, was a bit surprised by it all.
''The API crude statistics were bearish and the fundamentals are not very good,'' he said.
''If the market is relying on the gasoline-driven impetus, I'm afraid it won't last for too long,'' he added.
On Monday, the market disregarded reports that Shell took down a 48,000 cat cracker at its Wood River, Ill., plant on for a a week of repairs. Phillips Petroleum, meanwhile, said a leak caused it to shut ahead of schedule its 65,000 bpd Sweeny, Texas, cat cracker for a two-week maintenance.
On Tuesday, however, traders turned their attention to the refinery snafus -- a bearish signal -- even as many forecasters saw a modest build of crude in the API data.
API's crude report late in the day showed a build of 6.5 million barrels for the week ending April 5 and the DOE followed with data showing a smaller build of 5.4 million barrels.
The API gasoline data showed a slight build of 1.412 million barrels. DOE also reported an increase, but ata smaller rate of 400,000 barrels.
Distillate stocks from both groups were almost the same, showing a build of 1.8 million barrels for API and a rise of 1.195 million barrels for DOE.
The usual effects of the API data were reflected in a small loss for front-month crude and a slim gain on gasoline in overnight ACCESS trading. The bearishness carried through in early trading at NYMEX but toward midday, the market moved upside.
Meanwhile, the refinery glitches, whether real or not, became the day's recurring theme at NYMEX and related markets.
In the cash market, there were rumors of a problem at Amoco's huge 410,000 bpd Whiting, Indiana, plant. It is believed the problem stems from a complete power outage that occurred at the plant during a severe winter storm March 9.
Amoco officials, who generally do not comment on refinery operations, were not immediately available, but environmental regulators have confirmed the extent of the outage.
There have also been rumors of trouble at Mobil's reformer and hydrotreater at its 203,000 bpd Joliet, Ill., plant. Mobil has denied any problem.
''Based on what is happening in the market there are more refinery problems out there than we know,'' said a Midwest trader, noting the sharp rise in differentials.
U.S. Cash Crude - Prices Up In Line With NYMEX
NEW YORK, April 15 - U.S. cash crude differentials were steady on Wednesday morning but outright prices were up linked to the gain of about 27 cents on the NYMEX May futures contract.
The NYMEX was up after Venezuela's Petroleos de Venezuela (PDVSA) confirmed that its oil exports in April would fall as promised.
Luis Guisti, president of PDVSA, said Venezuela's oil exports will average 3.09 million barrels per day in 1998. But he said April's projected production will be 3.17 million barrels per day, down 200,000 bpd. Traders seemed to shrug off reports of problems at several refineries, mostly in the mid-U.S., as well as bearish inventory statistics released Tuesday afternoon by the American Petroleum Institute and Wednesday morning by the U.S. Deparmtent of Energy.
Crude oil inventories were up 6.5 million barrels according to the American Petroleum Instititue, and up 5.4 million barrels, said the U.S. Department of Energy.
Inventories in the U.S. Midwest, where storage is said to be near the saturation level, was up 600,000 barrels to 79.1 million barrels, according to the API.
On Wednesday morning, few deals were reported done as far as physical crudes in the U.S. were concerned.
At 12:13 EDT/1613 GMT, the May NYMEX contract was being traded at $15.39 per barrel, up 27 cents.
West Texas Intermedaite/Cushing, the U.S. cash benchmark, was talked at $15.45 to $15.50 per barrel, a price that includes the seven- to 10-cent exchange-for-physicals (EFP) premium.
West Texas Intermediate/Cushing postings-plus was done several times at $1.94 over WTI/Cushing and was also getting done at $1.95 and earlier at $1.93.
Light Louisiana Sweet/St. James was being talked in a range of 75 to 71 cents under WTI/Cushing. It reportedly was done at 72 cent under.
WTI/Midland remains a rock at 39/37 cents under WTI/Cushing. Differentials for that crude haven't changed in two weeks.
West Texas Sour/Midland was done Wednesday morning at -$2.15 and unchanged at -$2.20/-$2.15 at mid-day.
Heavy Louisiana Sweet/Empire was talked -$1.18/-$1.10.
Eugene Island was talked -$2.05/-$1.95.
The May/June spread was done earlier at minus 34 cents and
NYMEX Natural Gas Ends Firmer, Extends Gains On ACCESS
NEW YORK, April 15 - NYMEX Hub natural gas futures ended mostly higher Wednesday following a narrowly traded, quiet session, with most traders remaining cautious ahead of the weekly storage data.
May finished two cents higher at $2.521 per mmBtu after wavering between $2.501 and $2.55. June settled up 2.5 cents at $2.558, while other 1998 months still clung to the front months.
American Gas Association said gas stocks rose 22 bcf last week to 34 percent of capacity, stretching the surplus on year-ago inventories to 245 bcf. This news followed previous industry estimates around 32 bcf.
After the news, May moved up one to two cents to about $2.53-2.54.
''It's a little light,'' one trader said, referring to the AGA number.
Cash prices converged with futures in early trading, with Henry Hub quoted early at $2.50-2.51, but a lack of market conviction led prices into the mid-$2.40s by late morning.
Midcontinent values were also a little higher in the high-$2.30s to about $2.40, while Chicago city-gate prices stepped up to about $2.53-2.54. New York city-gate gas sold mostly at $2.70-2.73, sources said.
Technical ranges remained intact as open interest continued to drop sharply. The tally for Tuesday was 255,671, off 2,400 from Monday and down 9,459 from last Thursday.
May resistance was still seen at $2.554-2.555, with more selling expected to surface around $2.60, and then at $2.635, the $2.725 contract high and the low-$2.80s.
Traders said minor May support was around $2.50, followed by stronger support at $2.465 and the double bottom at $2.33.
An estimated 41,979 Hub contracts traded as of 1525 EDT, down from a total of 57,7 World petroleum stocks are already brimming over after this year's rare first quarter inventory build.
The glut of oil in storage is tethering world oil prices despite the production cuts pledged by world producers aimed at bolstering revenues.
International benchmark Brent is now less than $1.50 above nine-year lows scraped before Saudi Arabia, Mexico and Venezuela's March 22 pact to cut output.
Some 16 oil producers ultimately joined the pact, which should shave some 1.5 million barrels a day (bpd) from the 75 million bpd global market if pledges are honoured.
The deal linked 10 members of the Organisation of the Petroleum Exporting Countries (OPEC) with key producers from outside the group, chiefly Norway and Mexico.
But dealers are choosing to wait for confirmation that cuts are actually being implemented, wary after OPEC members' history of pumping above agreed production quotas.
The new API data did provide some hope for beleaguered oil producers, showing that U.S. total oil consumption in March jumped 3.8 percent from last year.
And demand in the key U.S. gasoline market was up 2.5 percent.
The robust economy, lower gasoline prices and gains in personal income combinined to spur higher demand, said the API.
The U.S. Department of Energy has predicted that this summer's U.S. driving season should post the biggest demand gains in a decade.
U.S. Spot Natural Gas Prices Follow Futures Higher
NEW YORK, April 15 - U.S. spot natural gas prices followed futures higher Wednesday, with more sellers emerging by late morning, industry sources said. Henry Hub swing gas traded at $2.50-2.51 after the futures open, but then gradually softened into the mid-$2.40s, indicating a daily gain of about four cents.
Similarly in the Midcontinent, prices rose an average of seven cents to the high-$2.30s to low-$2.40s.
Chicago city-gate, where temperature highs were hovering in the mid-to-high 50s, prices were quoted mostly at $2.53-2.54, up from Tuesday's trade in the high-$2.40s.
In the West, southern California border prices tacked on six cents to $2.61-2.64, while Permian prices were quoted about seven cents firmer at $2.33. San Juan values similarly recovered to $2.27-2.28.
In the Northeast, New York city-gate prices climbed into the low-to-mid $2.70s. Appalachian values on Columbia were also firmer in the low-$2.60s.
Cooler weather is forecast to arrive in the central U.S. Thursday and Friday. A highs of 73 degrees is expected to reach Dallas Friday. Above-normal temperatures are forecast to linger in the Northeast through early next week, with a high of 68 degrees anticipated in New York on Friday, while temperatures in the Southwest are expected to warm to seasonal levels by Friday, Weather Services Corp said.
Meanwhile, injection estimates for today's American Gas Association storage report were mostly around 32 bcf, a number which would widen the gap to year-ago inventories because of the 16 bcf draw seen last
year.
Canadian Spot Natural Gas Prices Turn Slightly Firmer
NEW YORK, April 15 - Canadian spot natural gas prices clambered higher Wednesday amid an ongoing tight supply situation and firmness on NYMEX, traders said.
Spot gas at the AECO storage hub in Alberta was quoted at C$2.33-2.34 per gigajoule (GJ), about three cents higher than yesterday and a week ago.
May business was reported done at C$2.29-2.33 from C$2.25-2.27, while summer quotes were heard at C$2.20-2.24. One-year prices at AECO were also quoted a little higher at C$2.49-2.53 from C$2.48 per GJ.
Storage injections in the west totalled 220 million cubic feet per day on Tuesday, while field receipts were still hovering around 12.5 billion cubic feet per day, a Calgary-based trader said.
In the export markets, Sumas, Wash., prices tacked on about seven cents to US$1.98-2.00 per million British thermal units (mmBtu), indicating a weekly gain of 12 cents.
Gas for export at Niagara also traded higher at US$2.62 per mmBtu in tandem with a slightly firmer futures market. However, prices were off about 18 cents from week-ago levels.
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