MARKET ACITIVITY/TRADING NOTES FOR DAY ENDING WED., APRIL 22, 1998 (1)
WELCOME
Good morning and welcome to Kerm's Korner - the free location on the internet Subject 10229 devoted to the Canadian Oil & Gas Industry. What one will find here is an extensive and comprehensive collection of information and data regarding current events and happenings in the Oil Patch.
We begin with an overview of stock markets in Canada with a little U.S. information thrown in to clearly establish the moods of investment in North America. We then jump into the world futures arena with the most concentrated information regarding crude oil and natural gas pricing. Following you will find the most recent articles written about the industry which are assembled from numerous sources across Canada. We will then bring you up to date with the latest announcements and reports released by companies in the industry. You will also find commentary and research notes on the industry in general, as well as individual companies.
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MARKET WATCH
Earnings optimism lifts TSE. Gains by Bombardier, BCE and the golds propelled Bay Street to a record close. The Dow fell off previous highs, but individual U.S. bank and computer stocks continued their advance
Canadian stocks rose as unexpectedly robust first-quarter profits boosted shares of Bombardier Inc. and BCE Inc., the Toronto Stock Exchange's most heavily weighted stocks. Gold stocks also advanced as the price of bullion climbed to a six-month high.
The Toronto Stock Exchange 300 composite index rose 56.73 points, or 0.7%, to a record 7822.25, surpassing the previous record close of 7817.65 set April 15.
Combined, BCE, Bombardier, Canadian Pacific Ltd., and Barrick Gold Corp. contributed 29 points to the advance.
About 128.7 million shares changed hands, up from about 124.7 million shares traded on Tuesday.
Barrick shares (abx/tse) jumped $1.25 to $33.65 and Placer Dome Inc. (pdg/tse) gained $1.10 to $22.30 as the gold price spiked US$2.40 higher to US$313.60 an ounce on the Comex division of the New York Mercantile Exchange.
BCE (bce/tse) jumped $1.15 to $62.50.
Bombardier (bbda/tse) surged $2.15 to $38.05 after it beat earnings estimates. Robust earnings also boosted the shares of Canadian Pacific and Inco Ltd.
Canadian Pacific shares (cp/tse) climbed $1.80 to $42.85 and Inco (n/tse) rose 65› to $27.35.
Financial services stocks snapped their three-day slide. Bank of Nova Scotia (bns/tse) rose 50› to $40 and Trimark Financial Corp. (tmf/tse) gained $3.50 to $56.
Other Canadian markets ended higher. The Montreal Exchange portfolio climbed 14.97 points, or 0.4%, to 3916.15. The Vancouver Stock Exchange rose 3.15 points, or 0.5%, to 635.66.
Computer shares gained on Wall Street on optimism that Microsoft Corp. would top profit estimates when it announced its first-quarter results after the market closed.
The Dow Jones industrial average lagged, falling 8.22 points to 9176.72, after briefly breaching 9200 for the first time.
About 701.6 million shares changed hands on the Big Board, up from about 680.7 million shares traded on Tuesday.
The Standard & Poor's 500 index rose 3.33 points, or 0.3%, to 1130, its second straight record.
The Nasdaq composite index climbed 13.74 points, or 0.7%, to a record 1917.61.
The Nasdaq's march higher was led by Microsoft (msft/nasdaq), which rose US$4 to US$98 7/8.
Bank shares, already red-hot from takeover speculation, gained a further boost from Bank of New York Co.'s unsolicited US$24-billion bid for Mellon Bank Corp.
Mellon shares (MEL/NYSE) rallied US$8 1/16 to US$77 13/16, while Bank of New York (BK/NYSE) fell US$1 13/16 to US$62 1/16. Other banks, including PNC Bank Corp. and Fleet Financial Group Inc., surged on speculation they might be bought at premiums. PNC shares (PNC/NYSE) advanced US$21 /2 to US$62 3/4 and Fleet (FLT/NYSE) rose US$1 15/16 to US$89 13/16.
Most computer shares gained. Dell Computer Corp. (dell/nasdaq) rose US$3 1/16 to US$77 7/16 and Compaq Computer Corp. (cpq/nyse) edged up US$1 9/16 to US$28 7/16.
Lucent Technologies Inc. (lu/nyse) gained US$2 3/8 to US$76 1/2 after the telecommunications company said its quarterly profit more than doubled. Lucent shares have climbed 92% so far this year.
Most drug companies fell after days of rallying on high hopes for impotence and cancer drugs.
Warner-Lambert Co. (wla/nyse) was one of the few winners. Its shares soared US$9 11/16 to US$187 13/16 on better-than-expected earnings.
Major international markets ended mostly lower.
London: British shares edged lower as institutional investor appetite for leading stocks dried up following a 16% rise by the benchmark index since the beginning of the year. The FT-SE index closed at 5931.1, down 23.9 points or 0.4%.
Frankfurt: German shares gave ground following their record-breaking performance at the start of a bullish week. The Dax index closed at 5360.65, down 28.29 points or 0.5%.
Tokyo: Japanese stocks closed slightly lower after trading within a narrow range as investors awaited news of details of the government's economic stimulus package. The 225-share Nikkei average closed at 15,761.54, down 64.13 points or 0.4%.
Hong Kong: Stocks closed flat in cautious trade after a government land auction failed to offer much guidance to the market. The Hang Seng index closed at 10,977.47, up 9.21 points.
Sydney: Australian stocks were weaker as Wall Street's latest record and rallying gold stocks failed to offset profit-taking in other sectors and a steep fall in News Corp. The all ordinaries index closed at 2,856.8, down 9.6 points or 0.3%.
OIL & GAS
EIA Sees World Oil Oversupply Narrowing
WASHINGTON, April 22 - World oil demand is expected to increase an average 2 percent a year over the next two decades, jumping from the current 75.2 million barrels per day (bpd) to 116.1 million bpd in 2020, the U.S. Energy Information Administration said Wednesday.
During the same period, the gap between world oil demand and supply is forecast to narrow, with supply reaching 115.9 million bpd in 2020 from the current level of 75.6 million bpd, the Energy Department's statistical agency said in its annual International Energy Outlook.
Industrialized countries, including the United States, Europe and Japan, are forecast to account for a large part of the oil demand, with their crude consumption expected to grow 1.1 percent a year to 55.3 million bpd by 2020, up from this year's 42.4 million bpd.
However, the share of oil in total energy consumption is expected to drop from 43 percent to 41 percent in the next two decades as industrialized nations switch to natural gas and other energy sources to replace oil for many uses.
"The major portion of oil's growth within the industrialized economies is in fuels used for transportation, where it has not substantial competition," the EIA said.
In developing countries, such as China, India and Brazil, oil consumption is forecast to increase 3.5 percent annually to 50.6 million bpd by 2020, compared to current consumption of 23 million bpd.
The developing economies of Asia will soon recover from their current slowdown and become a dominant force on the demand side of the world oil market by 2020, the EIA said.
The region's oil demand in 2000 is expected to average 13.3 million bpd -- close to Western Europe's 14.3 million bpd -- and Asia's projected oil consumption of 28.6 million bpd in 2020 would be greater than expected U.S. oil demand of 24.4 million bpd at that time, according to the EIA.
In China, oil demand is forecast to grow 5 percent a year, tripling by 2020 to 11.2 million bpd. "The potential for oil demand growth in China is large, given its huge population, its potential for sustained economic growth, and the characteristics of its transportation sector, the EIA said.
Most of the oil to meet world demand will be supplied by the Organization of Petroleum Exporting Countries (OPEC), according to the EIA.
OPEC crude production is expected to account for almost 52 percent of the world's daily oil supply of 115.9 million barrels in 2020, up from the current 40 percent, the EIA said.
"There is general agreement that OPEC members with large reserves and relatively low production capacity expansion costs can accommodate sizable increases in petroleum demand," the EIA said.
For North America, a declining U.S. oil supply, which would drop to 8.5 million bpd in 2020 from current levels of 9.4 million bpd, is expected to be more than offset by crude output increases in Canada and Mexico.
However, additional offshore oil discoveries in the Gulf of Mexico, increases in Alaska crude output and technological advances in production methods will slow the decline in U.S. output, the EIA said.
Canada is expected to add an additional 500,000 bpd in oil output from a combination of frontier area offshore projects and oil from tar sands to reach crude production of 3.4 million bpd by 2020.
In Mexico, government energy policies are expected to continue to encourage the efficient development of the country's vast resource base. Mexico's oil output is forecast to reach 4 million bpd by 2005 and hold at that level through 2020, the EIA said.
Separately, North Sea oil production is expected to peak in 2003, exceeding 7.6 million bpd.
As for oil prices, the EIA projects a barrel of crude will jump will average $19.11 in 2002, $21.48 in 2015 and $22.32 by 2020 in 1996 inflation adjusted dollars.
Feature Global Energy Exchanges Bet on Open Outcry for Now
LONDON, April 23 The world's energy futures exchanges are bucking the global trend by hanging on to open outcry trading in their key crude and petroleum product markets.
While other futures bourses appear to be moving inexorably towards buying and selling via electronic link-ups the IPE and NYMEX have pledged to continue the colourful tradition of traders shouting buy and sell orders aloud.
"It was felt trading volumes might fall if we were to go electronic," said a spokeswoman for the IPE. "There have been no examples of the successful transfer of open outcry trading in a commodity to an electronic system."
But the major energy trading floors -- London's International Petroleum Exchange and New York's Mercantile Exchange (NYMEX) -- have not ignored the trend towards inter-exchange alliances and the use of electronic systems.
The IPE, which concluded a strategic review earlier this year, is developing a global electronic system for out of hours trading in partnership with NYMEX, which already has computerised after hours business.
The IPE believes this will help boost growth in its maturing crude and gas oil (heating oil) futures.
IPE chiefs insist their aim is to expand their business rather than cut costs, despite complaints by members that open outcry was too costly and that a commission war between brokers had massacred profits.
A move to bigger premises elsewhere in the City financial district and the eventual reduction of open outcry hours from the current 11 daily have been suggested as other ways to bolster business.
The IPE has promised floor traders it will retain open outcry for the foreseeable future, well after the introduction of the electronic system tentatively targeted for mid-1999.
The IPE hopes its technology, based on the Energy Trading System designed in house for its natural gas contract, will form the basis for the IPE/NYMEX after hours venture, superseding NYMEX's current ACCESS software.
SIMEX INVITED TO JOIN Trade sources add that Singapore's International
Monetary Exchange will be invited to join the alliance, making for a genuinely global system.
The link is at least in part a bid to overcome the barrier represented by SIMEX's current exclusive right to trade the IPE's Brent crude contract during Asian hours, which the IPE has asked SIMEX to relinquish.
But it is also another attempt to promote energy futures in Asia, where a preference for long term contracts rather than spot market buying of crude cargoes has limited the attraction of using futures to hedge and speculate.
"SIMEX Brent hasn't worked but we are trying to replace it with something else," an IPE spokeswoman said.
SIMEX Brent has traded a daily average of only a few hundred lots, compared to a daily norm of 50,000 in London.
Despite the repeated failure of crude and product futures in Asia NYMEX hopes to announce plans soon for a regional crude contract, possibly based on a basket of sour (high sulphur) grades.
The Tokyo Commodity Exchange has also launched a crude price index which it hopes will lead to an underlying futures contract.
Energy exchanges have also expanded by establishing futures in non-traditional areas such as electricity and natural gas and developing options contracts.
NYMEX's natgas contract is well established while the IPE's version is in its infancy, with further growth hindered by the slow pace of utility deregulation and privatisation on mainland Europe.
The IPE has also proposed itself as the market place for the international trade in pollution permits which may develop in the wake of last year's conference on climate change in Kyoto, Japan.
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