MARKET ACITIVITY/TRADING NOTES FOR DAY ENDING MONDAY APRIL 27, 1998 (3)
OIL & GAS
Oil Market Heartened by Calls For More Cuts
LONDON, April 27 - Calls from OPEC producers for deeper output cuts on Monday gave renewed vigour to flagging oil markets.
Benchmark Brent blend closed up 35 cents a barrel at $14.25, buoyed by talk from a number of Organisation of Petroleum Exporting Countries ministers indicating support for the withdrawal of extra supplies from the bloated world market.
Venezuelan Oil Minister Erwin Arrieta said output needed to be trimmed by a further 500,000 barrels per day (bpd) on top of the 1.5 million bpd cut pledged recently by OPEC and non-OPEC producers.
Arrieta said he had a three-way conversation on Friday with his Saudi Arabian and Mexican counterparts and that any further cuts could come before a June OPEC meeting in Vienna.
''Revenues would be compensated for by a smaller volume of production but higher prices,'' Arrieta said in a television interview.
His comments echoed those of three Gulf Arab OPEC oil ministers.
''If the oil price stays where it is now there will be a lot of talk about further cuts and we don't rule out any possibility,'' said OPEC President and United Arab Emirates Oil Minister Obeid bin Saif al-Nasseri.
He found support from Kuwait and Qatar. But Norway, a major non-OPEC oil producer, said it was not considering adding to the reduction it has already pledged.
Oslo will implement 100,000 bpd of output reduction from May 1, said Oil Minister Marit Arnstad.
Oil producers have seen their export earnings 25 percent lower so far this year than in 1996 and 1997.
Dealers say they have yet to see firm evidence of the reductions which came into effect on April 1, led by a 1.25 million bpd OPEC reduction.
NYMEX Crude Ends Up On Output Cut Talk, Iraq News
NEW YORK, April 27 - A call for further oil output cuts by Venezuela sparked a rise in NYMEX crude oil futures Monday, but traders raised the usual caveats, deflating the impact of the news on the market.
NYMEX June crude gained 23 cents, settling at $15.32 on the news and on other supportive developments as well, rebounding from Friday's close at $15.09 as oil glut worries heightened again.
''We still have to see evidence of any cuts that producers made under the Riyadh agreement and until then this talk about new cuts is just that -- talk,'' said a wary NYMEX trader.
Crude oil appeared ready to retest fresh lows in the early morning after opening at $15.08, a cent off Friday's close. It later hit a low of $14.95 on the day on some technical selling.
''There were paper and fund buying that came in and that boosted prices,'' said the NYMEX trader.
Gasoline, which had been advancing on continuing problems in U.S. refineries amid forecasts of a big demand in the coming driving season until Friday, when it petered out, also rose.
May gasoline added 0.84 cent at 50.94 cents a gallon, ahead of Tuesday's release of weekly stock inventory data from the American Petroleum Institute.
Market watchers making early estimates said they see a drop in gasoline inventories in the API data.
May heating oil followed the market's rise, closing up 0.18 cent at 43.08 cents a gallon.
In London, IPE June Brent closed at a session high of $14.25 a barrel, up 31 cents on the day, on Venezuelan Oil Minister Erwin Arrieta's call for a further reduction of 500,000 barrels per day (bpd).
Arrieta's statement from Caracas followed reports over the weekend that the United Arab Emirates, Kuwait and Qatar would support any output reduction if it was needed.
OPEC President Obeid bin Saif al-Nasseri, who is UAE's oil minister, said that the 11-member cartel would consider further output cuts if prices remained low and provided non-OPEC producers were willing to reduce supplies.
Traders were again puzzled, however, when Luis Giusti, Venezuela's state oil company, Petroleos de Venezuela, said in New York that further oil production cuts by major producers were not yet needed.
Giusti said Venezuela was not planning to make any additional output reductions. He said he hadn't heard of Arrieta's comments.
Giusti is in New York to present to investors an upcoming $1.5 billion bond issue by Venezuela.
Traders said Venezuela appears to be raising hopes again, much as it did in March.
They were referring to Venezuela's statement about mid-March, after NYMEX crude hit a nine-year low of $12.80, that there was a possibility of OPEC and non-OPEC producers agreeing to cut production as a way to lift oil prices.
Secretive talks took place afterward, leading to the Riyadh agreement of March 22 spearheaded by Venezuela, OPEC kingpin Saudi Arabia and non-OPEC member Mexico.
In the agreement, which was confirmed in Vienna at an OPEC meeting the following week, OPEC and non-OPEC producers pledged to cut production by about 1.5 million bpd.
On other developments, traders watched for developments about the U.N. Security Council's review of sanctions against Iraq, which started early in the day Monday.
At the all-day review Monday, the U.S. acknowledged for the first time that Iraq had made progress on nuclear weapons and in its cooperation with U.N. arms inspectors but said it was premature to lift sanctions.
U.S. Ambassador Bill Richardson spoke to reporters after China called for a closing of the nuclear weapons file and for sanctions to end as soon as possible because U.N. arms experts had found little evidence of forbidden materials.
The Security Council held the all-day review of Iraqi sanctions, the first in nearly a year. The reviews, usually very 60 days, were suspended last June after Iraq interfered with arms inspectors.
Richardson said that ''based on the reports we have received, there is little sentiment to lift sanctions.'' The sanctions were imposed on Iraq shortly after it invaded Kuwait in 1990.
NYMEX Natural Gas Ends Down On Soft Cash, Mild Tempertures
NEW YORK, April 27 - NYMEX Hub natural gas futures ended lower across the board Monday in an active session, undermined by mild U.S. weather forecasts and reports of softer physical prices, market sources said.
May tumbled 7.6 cents to close at $2.266 per million British thermal units after trading today between $2.25 and $2.33. June settled 8.8 cents lower at $2.285, while other deferreds finished down by one to 8.8 cents.
''When they couldn't rally it, they took it down more in the afternoon. We could see more weakness. We've got more nukes this year, and stocks are in good shape,'' said one Midwest trader, noting milder weather forecast for later this week should set a bearish tone.
While the cash premium to May futures may buoy the spot contract Tuesday ahead of its expiry, few expected much upside without hotter weather to stir better cooling demand.
Below-normal eastern temperatures early this week are expected to warm to slightly above normal by midweek. Cool Midwest and Texas weather also was forecast to climb to above normal later in the week.
Technically, May trendline support was still seen in the $2.22 area, with next support expected at the March 18 low of $2.18 and then at the $2.135 low from March 16. Resistance was pegged in the $2.42-2.43 area, the 50 percent retracement point of last week's leg down, and then at last week's $2.585 high.
But with May set to go off the board Tuesday, traders focused on June, where support was now seen at Monday's low of $2.27, with better trendline buying likely in the $2.23-2.24 area. Major support was expected at the $2.16 March 16 low. June resistance was seen first at $2.45 and then at the $2.63 double top.
In the cash Monday, Gulf Coast prices eased slightly to the mid-$2.20s. Midwest values also slipped a penny or two to the mid-teens. Gas at the Chicago city gate was down two cents to the low-$2.30s, while in New York, cool weather drove prices up a few cents to the high-$2.50s.
The NYMEX 12-month Henry Hub strip fell 5.7 cents to $2.423. NYMEX said 93,800 contracts traded, up from Friday's revised tally of 74,577.
U.S. Spot Natural Gas Prices Ease Slightly With Weather
NEW YORK, April 27 - U.S. spot gas prices, pressured by mild forecasts this week and a growing stock surplus to last year, fell slightly Monday, but April activity slowed as players geared up for bidweek later this week.
''Cash looks a little soft. This has been a long time coming. Stocks are 300 b's (bcf) above last year and that's not bullish,'' said one East Coast trader, noting mild weather in most regions later this week should slow demand and add some pressure during bidweek later this week.
Spot cash prices at Henry Hub slipped a penny or two from Friday's levels to $2.26-2.31 per mmBtu.
Cool eastern temperatures early this week are expected to warm to normal or slightly above by midweek, pressuring most Gulf Coast pipes down one to two cents to the mid-$2.20s. May gas on Texas Eastern (ELA) was quoted at 4.25-4.75 cents under the NYMEX May quote.
In the Midcontinent, milder forecasts later this week also kept buyers relaxed and pushed values about two cents lower to the mid-teens. May Midcon gas was talked slightly higher than April in the high-teens. Spot gas at the Chicago city-gate was pegged two cents lower in the low-$2.30s.
Texas temperatures also are expected to climb to above normal later in the week.
In west Texas, Permian prices were still pressured by excess supplies in the market, with deals mostly reported done in the $2.08-2.10 area, off three cents from Friday. San Juan values firmed a few cents to the
low-$1.90s.
Prices at the southern California border dipped a nickel to the low-to-mid $2.30s.
In the Northeast, cool weather kept New York city gate prices steady to slightly firmer in the high-$2.50s, while Appalachian values on Columbia were flat in the low-to-mid $2.40s.
Canadian Spot Natural Gas Prices Rebound In Alberta
NEW YORK, April 27 - Canadian spot natural gas prices in Alberta recovered from last week's lows, but prices at the export points were slightly softer, traders said Monday.
Spot gas at the AECO storage hub in Alberta was quoted mostly at C$2.06 per gigajoule (GJ), though deals were reported done anywhere from C$2.02 and C$2.10. These prices compare with C$1.99-2.00 on Friday.
May prices, however, were mostly flat at C$1.99, while one-year business was reported at C$2.35-2.39.
Field receipts in Alberta were at 12.5 billion cubic feet per day (bcfd), while NOVA's linepack stood at its target of 12.8 bcfd, a market source said.
Meanwhile, injections in the west tallied up to 322 mmcfd on Saturday and 168 mmcfd on Sunday.
''They're getting behind day after day,'' one Calgary-based trader said, noting about 600 mmcf of gas needed to be put into storage every day until the start of the winter heating season around November 1.
At the export points, Sumas prices were little changed at US$1.63-1.65 per million British thermal units (mmBtu).
Eastern export prices at Niagara shed another four cents to the high-US$2.30s per mmBtu as May futures declined into the $2.20s.
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