OIL AND NATURAL GAS PRICING SCENE - PART 3
North Sea Brent Gains Six Cents In Aftermarket
North Sea Brent gained six cents in late trading in the U.S. on Friday.
November Brent was valued at $13.35 a barrel, up from its close earlier Friday at $13.29 on the International Petroleum Exchange.
Traders said two full cargoes of November cash Brent were sold, one at $13.32 and the other at $13.35. Other deals included 200 lots of November cash partial cargoes at $13.35, 200 lots at $13.37 and another 100 lots at $13.40.
The Brent November-December spread traded at minus 30 cents and at minus 30.5 cents in Friday's aftermarket.
NYMEX Crude Ends Up, Snaps Two-Day Losing Streak
Front-month crude futures on the New York Mercantile Exchange (NYMEX) gained on Friday, snapping a two-day losing streak and settling higher on short covering and position-squaring ahead of the weekend, traders said.
Crude and refined product futures rebounded after Thursday's heavy losses brought prices low enough, attracting some bargain hunting both from funds and speculators, traders said.
But the underlying bearishness due to a long-standing oversupply and concerns over the global economic turmoil cut the rebound short around midday.
In afternoon trading, news that Royal/Dutch Shell's Forcados crude oil export terminal in Nigeria was shut down on Thursday by protesting Nigerian youths, supported another uptick, a NYMEX floor trader said.
"The market's recent drop was an adjustment to hurricane-related gains of the past weeks...right now values appear to be stabilizing," said a NYMEX trader.
November crude settled at $14.58 a barrel, up 16 cents. The contract traded as high as $14.61 in the morning. It broke below the $14.34 support level later and dipped as low as $14.14. Volume was fairly moderate, traders said.
Heating oil and gasoline moved up along with crude. November heating oil ended down 0.08 cent at 39.37 cents a gallon, far below its session high of 39.80 cents while gasoline finished with a gain of 0.49 cent at 43.79 cents. The front-month gasoline contract traded between 42.60/43.90 cents.
From Monday's close, front-month crude has dropped 81 cents, and from a week ago, it has lost $1.06, in the wake of bearish news.
That was in contrast to crude's performance in the past month, when front-month crude rose by more than $3.00 a barrel, peaking at $16.36 on Oct. 1.
The gains were made on inventory draws due to the impact of storms that swept through the Gulf of Mexico and the Gulf Coast states, which forced production shut-ins offshore and refinery shutdowns onshore.
As the impact of the bad weather waned, the market's focus returned to the nagging oversupply situation.
On Monday, the market remained unimpressed with efforts by leading oil producers Saudi Arabia and Venezuela to push for the extension of oil production cuts totaling 3.1 million barrels per day for a few months in 1999.
The decision was reached at a meeting in Cancun, Mexico, between the two OPEC heavyweights and non-OPEC member Mexico -- all three being the architects of two producer output-cut agreements earlier this year. At the meeting, Mexico agreed to extend its commitment to cut 200,000 bpd from its oil exports to the middle of 1999, from year-end 1998.
Analysts said the trio missed the cue as the market was seeking signals that producers would consider the possibility of a third round of output cuts. With hopes of any further cuts dashed and as effects of Atlantic hurricanes dissipated, NYMEX crude fell.
On Tuesday, hopes that of a big draw in crude and gasoline stocks in the weekly U.S. inventory data lifted the market moderately.
But when conflicting crude weekly inventory data emerged --- a stockdraw of 3.9 million barrels in the American Petroleum Institute report and a stockbuild of 2.7 million in the federal Department of Energy version -- the market gave credence to the latter. Crude fell 44 cents to $15.06 on Wednesday.
On Thursday, still reeling from the inventory reports as well as additional bearish supply data from the Paris-based International Energy Agency, crude slumped to $14.42, losing 64 cents.
The IEA said that while members of OPEC had complied 98 percent in September, up from 91 percent in August, with their output cut pledges totalling 2.6 million barrels per day (bpd), non-OPEC producers had pumped more.
Initial estimates were that OPEC crude supply declined to 26.93 million bpd in September, down 135,000 bpd on the month, the IEA said.
But world supplies in September rose by a net 380,000 bpd to 74.08 milllion bpd, with non-OPEC countries pumping an extra 470,000 bpd, after maintenance work in August, IEA said.
Closing NYMEX Futures End Mixed - Looking For Direction
Crude oil and product futures closed mixed today, but prices closed sharply lower overall for the week.
Traders said the market continued to be pressured today by long liquidation after an early morning rebound attempt failed to generate much buying interest from the outside forces. Lacking any outside buying interest, the locals quickly went to work on completing the flushing process which began a week ago following the reversal down action in the markets last Thursday.
Jobe Moss, president of MCM Inc., said after becoming extremely overbought and almost frothy a couple of weeks ago in response to the upturn in the charts and weather problems, the market may have completed its downside correction today. He noted that volume was nearly 200,000 contracts on the big downdraft in prices Thursday in the crude oil market and that probably marked a selling climax with a little carryover selling to complete the process today.
He said today's action may have marked the end of an ABC wave 2 corrective decline. He noted that Elliott Wave analysis states that market psychology is often more negative at wave 2 bottoms than at the end of the bear market. He said the psychology is pretty negative going home tonight with all the fresh worries about the fallout on global energy demand from the steep declines in stock prices this week. In addition, he pointed to the widespread expectations for crude oil stocks to rise sharply this month now that the hurricane problems are over and overseas shipments are poised to increase.
He said the 55-day moving average will be the key to watch in the energy complex. While crude oil and heating oil fell below those long-term moving averages this week, gasoline did not. In fact, the 55-day moving average in crude oil tod Turkey and Syria, several sources said. But many emphasized that these conflicts continue to take a back seat to perceptions that supplies continue to outdistance demand and the weak chart picture.
Additional early support was also tied to weather shut-ins in Mexico, but after watching the hurricane premium in these markets get erased this week few see any lasting impact on prices.
U.S. Cash Crude Prices Close With Modest Rally
U.S. cash crude prices crawled higher on Friday after two days of heavy losses, though differentials for most grades were steady as the week closed quietly.
The front-month, November, light crude oil contract on the New York Mercantile Exchange (NYMEX) settled up 16 cents at $14.59 a barrel, coming back from a low of $14.14 a barrel earlier in the session.
Still, the rise of NYMEX futures and therefore outright cash crude prices wasn't quite enough to counter the dramatic dip in oil prices earlier in the week. The NYMEX November contract began the week valued at $15.64 per barrel.
The market appeared to receive a hand up Friday by news that Royal/Dutch Shell's Nigerian oil producing unit said its Forcados crude oil export terminal had shut down by protesters.
In the cash market, Light Louisiana Sweet/St. James reacted to the shut down by climbing several cents, trading at 22 cents under West Texas Intermediate/Cushing compared to deals as low as 30 cents under on Thursday.
Crude futures and cash crude benchmark WTI/Cushing were down this week largely on bearish oil stocks statistics in the U.S. as well as International Energy Agency (IEA), which showed world oil supplies increased last month because of a jump in non-OPEC production.
With an exchange-for-physical premium of three to four cents, U.S. crude benchmark West Texas Intermediate/Cushing was talked between $14.60 to $14.65 per barrel by the close of trade Friday..
Meanwhile, West Texas Sour/Midland came back a bit Friday to trade at $1.45 a barrel under the benchmark, following a sharp drop in the grade on Thursday. West Texas Intermediate/Cushing was talked at minus 27 cents to minus 22 cents.
Heavy Louisiana Sweet/Empire was said to be bid at about 80 cents below WTI/Cushing, though traders couldn't point to any fresh deals.
WTI/Cushing postings plus traded at $2.37, $2.39, and $2.40 a barrel, traders said.
U.S. Spot Products-Heating Oil Leads The Losses
U.S. spot products differentials ended weaker late Friday as high stocks fears started to weigh down sentiment, with heating oil in New York Harbor taking the brunt of the losses and depressing prices in the Gulf, traders said.
High sulphur distillate stocks in Padd 1 accounted for most of the 156,000 barrel nationwide build last week by rising by 538,000 barrels while both the Gulf Coast and the Midwest fell.
Russian gas oil imports have added to the pool with total imports at 139,000 barrels, 112,000 barrels higher week-on-week.
Gulf Coast traders said Chevron <CHV.N> finally emerged as a gasoline buyer after a two-day absence. The refiner had been an active buyer since last week amid its shutdown of its hurricane-hit 295,000-bpd Pascagoula, Miss. plant.
But its appearance and news that Exxon had shutdown a big 186,000 bpd crude unit at Exxon's 450,000 bpd Baton Rouge, La. refinery for six weeks since last Thursday, did not spur a recovery.
On the NYMEX, heating oil reflected the same bearish sentiment as the cash market with the November contract falling 0.08 cent at 39.37 cents a gallon.
Crude and gasoline futures however rebounded after Thursday's heavy losses brought prices low enough, attracting some bargain hunting both from funds and speculators, traders said.
November crude settled at $14.58 a barrel, up 16 cents, while gasoline finished with a gain of 0.49 cent at 43.79 cents per gallon.
NEW YORK HARBOR
Heating oil differentials were assessed half a penny softer amid thin talk amid talk of high stocks but were expected to improve by the month's end as the strength in the Gulf Coast has kept the arbitrage closed, traders said. Prompt heating oil was heard offered at 2.50 cent under the screen.
Low sulphur diesel was pegged at a 2.50 cents premium, supported by Sun's and Tosco's turnarounds in the northeast with output dropping 214,000 barrels in the week, and only a marginal build of 26,000 registered in Padd 1.
Prompt regular conventional M4-grade gasoline was also around half a penny weaker, traded at 1.50 and 1.75 cents below the print, while regular reformulated A4-grade gasoline was pegged at flat to the November print.
On the premium grades, conventional V4 was pegged at 2.50/3.25 cents premium and D4 RFG was pegged at 5.25/6.00 cents premium.
Jet fuel on the 54-grade was pegged at 4.25 cents premium and the 55-grade was at a 4.75 cents premium.
GULF COAST
The Gulf Coast heating oil puddle grew Friday and weakened differentials there as soft New York Harbor heat gave producers little incentive to pump it north, traders said.
Heat lost 0.50 cent and was pegged at 2.00/1.75 cents under the screen.
Low sulphur diesel was pegged 0.30 cent lower at 1.10/1.20 cents under the November screen, and traded at 1.25 cents under.
Conventional gasoline differentials continued to fall even though Chevron returned as a buyer after a two-day absence.
Regular conventional M4 gasoline, which schedules later in the day, was pegged at 3.35/3.10 cents under the screen, losing about 0.20 cent on the day. Any cycle was pegged at 3.40/3.20 cents under the screen, and traded at 3.40 cents under.
Jet fuel prompt 54-grade lost 0.50 cent amid weak demand to 2.00/2.50 cents over the screen for back 29 cycle.
Kerosene 55-grade was pegged at a 0.40 cent premium to the 54-grade.
A3 reformulated gasoline was pegged at 1.00 cent under, and the V3 premium conventional at 4.00 cents over.
MIDCONTINENT
Chicago gasoline slipped on lack of buying and on the back of bearish U.S. Gulf hub differentials, traders said.
Chicago jet was pegged steady at 6.00/6.25 cents over the screen, on a lack of supply as there was little incentive for producers to run barrels north in previous weeks. Group Three jet was pegged steady at 3.00/3.25 cents over the screen.
November Chicago regular gasoline was pegged at 2.00/1.75 cent discount for second cycle and 2.50/2.20 under for third cycle, with 2.20 under trading.
Premium grades were pegged 4.00/4.50 regrade in the Group and 4.00 cent regrade in Chicago.
Low sulphur diesel in the Group held on to 0.50 cent gains and was assessed at 2.00/2.20 cent premium to the print, while Chicago slipped and was pegged at 2.50/2.75 cents premium, with 2.50 cents trading.
Excess Supply Drags Down U.S. Spot Natural Gas Prices
U.S. spot natural gas prices fell sharply Friday as a weak demand coupled with ample supply left sellers scrambling for a place to put their gas, industry sources said.
Swing gas prices at Henry Hub dropped to $1.76-1.83 per mmBtu, down more than 20 cents from Thursday.
Midcontinent pipes were similarly lower at $1.68-1.75, while Chicago city gate quotes slid to the low-$1.90s.
In west Texas, El Paso Permian prices also lost nearly 20 cents to about $1.63-1.65, while Waha values were quoted at $1.67-1.73.
At the Southern California border, prices shed about 10 cents to $2.02, and San Juan prices slumped to $1.55-1.65.
Contributing to the softer market, sources said, was the expected return of Waha's turbine and treating plant later today.
On the East Coast, New York city gate prices were quoted near $2.00, while Appalachian quotes were heard at $1.95-2.05.
Forecasts for early next week called for slightly below normal temperatures across the eastern U.S. and stretching into Texas and the southern plains, while above-normal temperatures are expected to cover California and parts of the Southwest and Northwest.
Canada Natural Gas Prices Firm In West Despite Holiday
Canadian spot natural gas prices remained fairly strong Friday despite the upcoming long holiday weekend, industry sources said.
Canadian offices will be closed on Monday, Oct 12, in observance of Thanksgiving Day.
Day prices at Alberta's AECO storage hub were quoted widely at C$2.21-2.34 per gigajoule (GJ), indicating an average gain of four cents. Most recent quotes were heard near C$2.30.
November business at AECO was reported done at C$2.57-2.60 per GJ, while the winter market was pegged at C$2.80-2.82 in light trade.
Supporting cash prices, sources said, was the outage on NOVA, which was affecting supply on Segments 1-5.
According to NOVA, about 40 million cubic feet per day (mmcfd) of supply will be affected as a result of the outage at its Berland River Compressor Station.
At Westcoast Energy's Station 2 compressor, prices also remained firm at C$2.23-2.25 per GJ.
In the export markets, prices at Sumas/Huntingdon eased to about US$1.64-1.68 per million British thermal units (mmBtu), while Niagara prices in the east slid about 15 cents to the mid-to-high US$1.90s in response to the declining U.S. market.
Gasoline Prices Remain Stable
Gasoline prices stayed steady across the country despite erratic rates in regional markets over the last two weeks.
The overall price of gasoline, including all grades and taxes, was just under $1.10 per gallon on Friday, up about three-quarters of a cent over two weeks, according to the Lundberg Survey of 10,000 stations nationwide.
The increase was ''more like a gentle lift ... a ripple'' in what has been a nearly yearlong decline, analyst Trilby Lundberg said Sunday, noting that overall prices are 19 cents lower than they were at this time last year.
At self-service pumps, the average price for regular gasoline was $1.04 per gallon, mid-grade was $1.15 and premium was $1.23. At full-service pumps, regular was $1.47, mid-grade was $1.56 and premium was $1.63.
Prices rose slightly on the East and Gulf coasts but fell in the West, which saw increases earlier in the year, Ms. Lundberg said.
Crude oil prices remain relatively low and supplies of both crude and gasoline are plentiful, Ms. Lundberg said. However, a cold winter could increase demand for heating oil, prompting a reduction in gasoline refining and a rise in crude oil prices, she added.
10/12 09:30 NYMEX Oils Open Seen Up 5-10 Cts, Continue Rebound
NYMEX November crude futures were expected to open five to 10 cents firmer as traders expect Friday's bounce to continue, but not on any grand scale.
Refined products were called unchanged to 0.25 cent higher. "We seemed to have bottomed out on Friday and we think the market will continue moving up but not much," said an ABM AMRO-Energex trader.
Lacking any market-moving fundamental news, the market may be looking to technical factors for direction, he added. Crude may be looking to move initially to $14.70 and if that is breached, to $15.10, he added.
Other traders said trading may be slower as some traders took the day off, coinciding with the Columbus Day holiday.
Analysts said NYMEX crude oil and products futures look set for a short period of consolidation after breaking their decline from recent highs on Friday.
Analysts said sentiment remained bearish for the short term. Among the market's concerns are the global glut and fears of growing economic problems in many industrialized countries.
Analysts said they expected any upside impetus stemming from Friday's speculative short-covering to be short-lived and few would rule out a test of the $13.28 November contract low for crude.
In overnight ACCESS trading, November crude closed four cents up at $14.63 cents a barrel. The contract traded between $14.49/14.70.
November heating oil gained 0.08 cent at 39.45 cents a gallon while gasoline was flat at 44.10 cents.
In London, November Brent on the International Petroleum Exchange held steady Monday morning, consolidating from Friday's speculative rally, but with little followthrough buying seen.
At 0917 EDT/1317 GMT, the November Brent contract traded at $13.34, up seven cents cents.
On Friday, NYMEX front-month crude gained, snapping a two-day losing streak and settling higher at $14.58, up 16 cents, on short covering and position-squaring ahead of the weekend.
Crude and refined product futures rebounded after Thursday's heavy losses brought prices low enough, attracting some bargain hunting both from funds and speculators.
November heating oil ended down 0.08 cent at 39.37 cents a gallon, far below its session high of 39.80 cents while gasoline finished with a gain of 0.49 cent at 43.79 cents. The front-month gasoline contract traded between 42.60/43.90 cents.
In other news, the United Nations sanctions committee has so far approved 31 contracts for spare parts needed to repair Iraq's dilapidated oil facilities, a U.N. report on Monday said.
The approved contracts are valued at $54.9 million and are part of 87 submitted to the sanctions panel, the U.N. report said.
The U.N. Security Council earlier this year approved $300 million that would be spent under the "oil-for-food" program to repair the facilities, which were damaged during the 1991 Gulf War over Kuwait.
The deal is an exception to sanctions the U.N. imposed on Iraq for its 1990 invasion of Kuwait. The deal began in in December 1996 and proceeds are used to buy food, medicines and other humanitarian needs of Iraqi citizens.
In Beirut, Jorge Zemella, managing director of Petroleos de Venezuela's London office, said that Venezuela would be hard pressed to undertake further oil output cuts to help the market if prices remain soft.
"Venezuela would be in a very difficult position to do so (undertake cuts). The economic situation in Venezuela, as in other producing countries has been deteriorating considerably,"he said.
Zemmella said that from an economic and political point of view, it will be very difficult to implement additional cuts, noting that Venezuela's income has been reduced drastically and the government has had to reduce its budget three times already.
Venezuela, along with OPEC heavyweight Saudi Arabia and non-OPEC Mexico are the architects of two producers' agreements earlier this year to withdraw 3.1 million barrels from the market. The agreements were reach in a move to help revive sickly oil prices.
NYMEX Hub Natural Gas Called Lower On Weak Fundamentals
NYMEX Hub natural gas futures were expected to open lower Monday, pressured early by a weak weather-related demand, industry sources said.
November over-the-counter trade ranged from $2.14 to $2.15 per mmBtu this morning after settling Friday at $2.191.
Traders said they were eyeing next support at $2.12, with additional buying seen at $2.04, $2.031 and $2.00-2.01. Resistance was pegged in the mid-$2.20s, with further selling expected to surface near $2.40.
Weather forecasts called for mostly moderate weather across the U.S. this week, with temperature highs seen in the 50s and 60s in the upper Midwest and Northeast and in the 70s and 80s in the southern plains and Texas.
Today In The Energy Markets - Oct 12
DIARY OF ENERGY MARKET EVENTS
BEIRUT - 12th annual energy conference organised by APS Conferences at Le Bristol Hotel.
AMSTERDAM - CoalTrans conference of world coal industry begins (To October 14).
BRUSSELS - Intertanko Brussels Tanker Event at the Conrad International.
BRUSSELS - Distrigas press seminar on Interconnector pipeline and forecast for European gas markets.
HEIDELBERG, Germany - Electricity experts' conference on "Competition and Security" 1200 GMT.
LONDON - UK Competitive Electricity Market conference organised by IBC at Claridge's hotel.
PHOENIX, Ariz. - National Mining Assoc.'s annual convention. The Pointe Hilton Resort on South Mountain (To October 14).
ABU DHABI - Abu Dhabi International Petroleum Exhibition and Conference (Second day).
ABU DHABI - Middle East Gas Summit '98 (Third day).
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