MARKET ACITIVITY/TRADING NOTES FOR DAY ENDING THURS., MAY 7, 1998 (2)
OIL & GAS
Oil Prices Sag As Glut Spoils The Party
LONDON, May 7 - Oil prices retreated in late trading on Thursday after enthusiastic buying early in the day petered out.
At 8:30 p.m. (1930 GMT), benchmark North Sea Brent had settled two cents lower at $14.47 a barrel in London, posting losses as players liquidated positions before the market closed.
Earlier, June Brent had gained 31 cents to hit a day's high of $14.80 amid aggressive buying.
The volatility in the market reinforced analysts' warnings that there simply was still too much oil around.
Dealers said Brent's rally fuelled by speculation about the possibility of fresh production cuts had nursed anaemic markets stricken by global oversupply.
Other factors driving up values included buying of cheap prompt New York U.S. light crude futures to profit from more expensive forward prices.
Traders said another factor could be an attempt by major North Sea producers to push outright prices higher to minimise their offshore industry tax exposure.
But dealers and some analysts said a sea of crude oil remained without a home and storage tanks globally were brimming.
''Overall the market is well supplied. The fundamentals point weaker,'' said one trader.
A near-term glut in U.S. crude oil markets is having a dampening effect on physical crude prices in the world's largest energy market.
The oversupply is slackening U.S. demand for imported oil and crimping values for West African and other grades normally sold into the United States.
''There's too much oil chasing too few buyers,'' said Russell Hill, senior trader at Austrian oil company OMV.
Earlier in the week, bearish U.S. market stock data confirmed big rises in both crude and product stocks.
Prices were pummelled after ministers from Saudi Arabia, Mexico and Venezuela dismayed market expectation at the weekend that they would meet to discuss further output cuts.
But the rumours have not gone away and a Gulf source said on Tuesday he expected the three ministers to meet within two weeks.
A discreet Riyadh gathering of the three energy chiefs in March laid the ground for a landmark pact between OPEC and non-OPEC producers that pledged to cut back some 1.5 million barrels per day (bpd) from April 1.
Traders are now scrutinising output figures to see if producers are living up to their promises.
A Reuters survey of April output published on Wednesday found OPEC producers -- who committed to cut some 1.25 million bpd -- had gone some, but not all of the way to meeting their promises.
NYMEX Crude Drifts Lower In Lackluster Trading
Crude oil and petroleum-products futures settled modestly lower Thursday in lackluster trading on the New York Mercantile Exchange.
A meeting of Middle East oil ministers in Damascus and solid support around $15.20 kept sellers at bay, traders said. Market bears were wary that the meeting may yield production cuts beyond those agreed to by the Organization of Petroleum Exporting Countries and non-OPEC producers in March.
Buyers, meanwhile, were reluctant to get too aggressive after three consecutive down sessions, traders said.
Late in Thursday's session, Mexico said it had no plans to make further crude export reductions and didn't plan to meet with other oil producers in the near future.
OPEC's most recent efforts to cut oil production have been mostly successful, but a rise in output from Iraq offset their benefits, traders noted Thursday. The latest reports show that OPEC has largely complied with its output pact by cutting production by 1.117 million barrels a day from February levels. But a 425,000 barrels-a-day rise in Iraqi production in April from February put total OPEC output only 692,000 barrels lower. Iraq was excluded from the pact because its oil output is handled by the United Nations, which currently allows Iraq to sell $2 billion in oil every six months to finance humanitarian aid purchases.
Analysts expected the market to discount Baghdad's most recent saber-rattling. Iraq warned the United Nations again Thursday that it has more than one alternative at its disposal to force a quick end to sanctions.
The U.N. in April refused to lift sanctions on Iraq, which have been in place since Iraq's 1990 invasion of Kuwait. "Those who think they are capable of imprisoning Iraq in a dark tunnel for an unspecified period of time ... have to remember that there is more than a way to exit any tunnel," warned the Iraqi paper Al-Thawra. The newspaper didn't specify the available options.
ACCESS - U.S Crude Prices Steady Despite Mexico News
NEW YORK, May 7 - U.S. crude oil prices were steady in overnight futures trade Thursday despite earlier news that Mexico's would refuse to cut oil production further.
Mexico, along with Venezuela and Saudi Arabia, in March drafted a pact to help cut world oil production by about 1.5 million barrels-per-day (bpd).
But the country's energy minister on Thursday refused to pledge further cuts until Mexico studies oil prices more.
Traders on ACCESS, the after-hours market, said crude intially eased about 10 cents a barrel in the overnight session on concerns that Mexico's refusal to cut output would prolong the world's oil glut.
But oil futures edged back up to $15.25 a barrel at 1900 EDT, amid speculative buying. The crude stood one cent a barrel above the close, traders said. A heavy 1,478 lots traded for all futures months.
''Some bids have come back in,'' a trader said. ''Otherwise there's no news.''
Oil prices earlier fell 13 cents a barrel to $15.24 on the New York Mercantile Exchange (NYMEX) due to speculative selling Thursday.
On ACCESS, June unleaded gasoline was bid 52.20 cents a gallon, offered at 52.45 cents a gallon by 1900 EDT. The contract settled at 52.19 cents. About 163 lots changed hands for June, with 110 lots overall on ACCESS.
Meanwhile, June heating oil eased about 0.03 cent a gallon to 43.55 cents on ACCESS, traders said, amid volume of 261 lots by 1900 EDT.
NYMEX Hub Natural Gas Ends Up On Technical Rebound
NEW YORK, May 7 - NYMEX Hub natural gas futures ended higher across the board Thursday in moderate trade, underpinned by firmer physical prices and some short covering after an early attempt to move lower stalled at support.
June climbed 2.4 cents to close at $2.159 per million British thermal units after trading in a narrow range betweem $2.13 and $2.18. July settled 2.5 cents higher at $2.218. Other deferreds ended up by one to 2.9 cents.
''We saw some short covering today that held us up, and there's been some heat in Texas, but I don't know what's going to take us much higher,'' said one Texas-based trader, noting mild temperatures in most other regions and a huge storage overhang should limit any rally attempts near-term.
AGA data released Wednesday showed U.S. gas stocks rose last week by 78 bcf, well above Reuter poll estimates in the 50-60 bcf range. Overall stocks climbed to 377 bcf, or 41.9 percent, above a year ago.
Temperatures today in Texas will average 10-15 degrees F above normal, then run several to 10 degrees above for the next week or so. The mercury in the Midwest should stay slightly below normal through the weekend, then warm to several degrees above by early next week. Eastern temperatures are expected to average several degrees above normal for the period.
Technical traders said June was still locked in a range, with key support pegged at $2.105-2.11, a spot continuation chart low and Monday's low. Major buying was expected at the $2.05 double bottom from January and then at $2.
June resistance was seen in the low-$2.20s, then at $2.27 and at last week's high of $2.355. Further resistance was expected at $2.37, which is the 50 percent retracement point of the recent selloff. Major selling was expected at the $2.63 double top.
In the cash Thursday, Gulf Coast swing prices were talked three cents higher in the low-teens, still more than 10 cents below May indices. Midwest pipes were up almost a nickel to near the $2.10 level, more than five cents under index. Gas at the Chicago city gate was three cents higher in the mid-$2.20s, while New York was up slightly to the high-$2.30s.
The NYMEX 12-month Henry Hub strip rose 2.3 cents $2.374. NYMEX said an estimated 47,753 contracts traded, down from Wednesday's revised tally of 68,017.
US Spot Natural Gas Prices Propped Up By Heat, Outages
NEW YORK, May 7 - Lingering heat in Texas and maintenance outages pushed U.S. spot natural gas prices higher on Thursday, industry sources said.
However, several sources noted that prices may retreat by next week when some plants return to service and slightly cooler weather moves across the U.S.
Cash prices at Henry Hub were quoted today mostly at $2.14-2.17 per mmBtu, indicating a gain of about four cents.
In the Midcontinent, prices rose four cents to about $2.08-2.09, with Northern at Demarcation seen peaking to as high as $2.20. Chicago city gate was pegged equally firmer in the mid-$2.20s.
Strengthening prices at Demarcation, traders said, was the scheduled outage at Northern Natural's 270 million cubic feet per day (mmcfd) Hugoton gas plant in Kansas. The plant is slated to restart Friday evening after shutting down this morning for maintenance. Also tightening supplies in Kansas was the continuing outage at Northern's 200 mmcfd Bushton plant, which is expected to end by Friday morning.
In west Texas, Permian prices climbed four cents to mostly $1.98-1.99, while San Juan values rebounded to the low-to-mid $1.90s. Southern California border quotes were up two cents to about $2.18.
Northern's Keystone gas plant in western Texas is still scheduled to return to service Friday, May 15, following unplanned maintenance.
In generation news, the 750 megawatt (MW) Four Corners 5 coal unit in New Mexico is expected to return to service Friday after shutting down Tuesday for tube leak repairs. Also in New Mexico, the 315 MW San Juan coal unit 1 was back on line, while the adjacent 316 MW unit 2 was expected to restart tonight. Also, the 540 MW unit 3 is now slated to restart Sunday.
In the Northeast, gas at the New York city gate traded mostly in the high-$2.30s, while Appalachian prices on Columbia hovered around $2.30-2.31, market sources said.
Canada Natural Gas Softens Again, Stock Refills Resume
NEW YORK, May 7 - Canadian spot natural gas prices continued their retreat Thursday as more supply became available and storage injections resumed, traders said.
Spot gas at the AECO storage hub in Alberta was quoted at C$1.87-1.89 per gigajoule (GJ), off about five cents from Wednesday. June followed May lower to about C$1.84, while one-year business was quoted fairly steady around C$2.35 per GJ.
The June-October AECO market was talked at C$1.83-1.84 per GJ.
About 128 million cubic feet per day (mmcfd) of gas was injected into storage on Wednesday, a Calgary based trader said, following a 680 mmcfd withdrawal on Tuesday.
At Sumas, Wash., prices followed Alberta values lower to about US$1.53 per million British thermal units (mmBtu).
Meanwhile, the 700 mmcfd McMahon gas plant in northeastern BC, owned and operated by Westcoast Energy (W/TSE), is scheduled to shut May 17 for 19 days of maintenance. Capacity will drop to 580 mmcfd on May 17 and then to as low as 260 mmcfd on May 18-May 19. By June 5 capacity is expected to rise to about 680 mmcfd.
Continued Next Page
|
