OIL AND NATURAL GAS PRICING SCENE - PART 3
Advisory: DOE WPSR/World Crude Oil Report Delayed Until Thursday
Due to the Columbus Day holiday on Monday, Oct. 12, the Department of Energy (DOE) Weekly Petroleum Stocks Report (WPSR) and World Crude Oil Report are delayed until Thursday, Oct. 15, according to a source at the DOE.
US Crude Outlook - Oversupply Turns Market Bearish
The U.S. crude oil market will feel the pressure of several ships of foreign oil heading to the U.S., particularly since U.S. demand for crude is not very strong, traders and analysts said on Wednesday, after the release of the latest U.S. inventory data.
"I think we are heading down. There is a significant upswing in (crude) imports," Ritterbusch said, pointing to a fleet of ships carrying Brent towards the U.S. market.
One U.S. trader is said to be bringing four Ultra Large Crude Carriers (ULCCs) of the light sweet European crude towards the Gulf Coast, while other traders are also said to be showing November Brent in the U.S. Gulf at discounts around 75 cents under December West Texas Intermediate. Each ULCC carries more than 300,000 tons, or more than two million barrels of crude.
While imports are said to be streaming in, few companies are keen to build stocks any higher given the relatively narrow "roll" between November and December prices of U.S. benchmark WTI.
"The roll is coming off at the moment, but you're not going to see anyone rushing to build stocks with this contango," said one Gulf Coast crude trader. November crude is now trading between 20-18 cents a barrel lower than December crude, not enough incentive to store barrels.
News of production disruptions in Nigeria is not proving especially supportive of crude markets, traders said, noting that there were still ample early November barrels and still some October barrels of West African crudes as yet unsold. A series of community disturbances in Nigeria have stopped one fifth of the country's production, but traders said they were still monitoring the situation.
The latest U.S. inventory figures released earlier this week are not much help either, and traders dismissed the odd figures, saying they reflected short-term disruptions caused by hurricane Georges. While the American Petroleum Institute (API) figures showed a sharp drawdown of 3.8 million barrels, the U.S. Department of Energy report showed a build of 2.7 million barrels in U.S. stocks of crude oil.
"The statistics were neutral to bearish," said Nizam Sharief of Hornsby & Co., adding that the the disparity in the weekly reports reflected the disruptions caused by hurricane Georges, the fourth storm to pound the Gulf of Mexico in as many weeks.
"In the very near term, we are going to drop below $15," Sharief predicted. The front-month November contract on the New York Mercantile Exchange settled 44 cents lower at $15.06 on Wednesday, and touched a low of $15.02 in intraday trading.
Analysts pointed bearishly to the relatively high product inventories, especially in distillate stocks, which include stocks of heating oil. While U.S. stocks of gasoline are 9.75 million barrels higher than last year's levels, those of distillates are 16.86 million barrels higher than last year.
On the demand side, the picture is also bearish in the short-term, since Sun's cuts of 177,000 barrel per day (bpd) at its two-refinery complex in Philadelphia, Pennsylvania are expected to continue until the end of the month. Similarly, Tosco's 110,000 bpd refinery in Bayway, New Jersey is not expected back up until the second half of October.
Also, the crude unit at British Petroleum's 250,000 bpd Belle Chase refinery in Louisiana still hasn't been brought back on stream after a fire broke out in the unit last week. The crude unit is expected to remain shut for another week or so, according to a company statement.
Expectations are that Chevron's Pascagoula refinery in Mississippi will be shut even longer after it suffered flooding when Hurricane Georges pounded the area late last month.
U.S. Product Outlook-Firm On Extended Outages
Extensive unplanned refinery shutdowns due to Hurricane Georges last week boosted U.S. Gulf Coast gasoline prices, and the rally is expected to continue as two major plants were affected, traders said on Monday. "Looking at the fundamentals as far as refining is concerned, the shutdowns will put more buyers in the market than anticipated,"a Gulf Coast trader said.
The hurricane which hit the Gulf Coast a week ago took down at least seven refineries in Louisiana and Mississippi. Five of them escaped any damage but the precautionary shutdowns took out around a week's worth of 928,000 barrel-per-day of production, traders said.
But what sent buyers into the market and prices soaring in "refining row", was the longer lasting mayhem the hurricane brought at Chevron Corp's <CHV.N> and BP's <BP.L> plant.
Hit by floods, Chevron's 295,000 bpd refinery at Pascagoula, Miss. had some five feet of silt and would take at least a month to begin its start up process, traders said.
More pessimistic sources said the plant will be shut until the end of the year but the company declined to comment on the duration of the shutdown.
Although largely unscathed by the hurricane, a fire broke out at BP's 250,000 bpd Alliance refinery at Belle Chasse, LA. during its start up process on Wednesday. It restarted its 100,000 bpd catalytic cracker and 37,800 bpd reformer and other secondary units on Sunday but its crude unit will remain shut for another seven to ten days.
"Chevron is quite a large producer on the Gulf Coast and I think it will keep the market supported," a trader said. "Gasoline will and can climb even higher...I wouldn't be surprised if the conventional gasoline will go into a premium...it is near enough."
Gasoline outright prices on the Gulf Coast rose nearly 3.00 cents per gallon last week to around 45.00 cents. Its differential to the NYMEX rose from a 3.75 cent discount to the NYMEX before the hurricane hit, to 0.25 cent premium on Monday.
With the cut in output, traders expected another drawdown in gasoline stocks which fell 1.8 million barrels to 21 million in the week ending Sept. 25 according to the American Petroleum Institute (API).
Both BP and Chevron were amongst the aggressive buyers seeking mainly the gasoline, jet fuel and low sulphur diesel.
But high stocks of heating oil capped any rallies in both the Gulf and the northeast, and prices in both hubs slipped by around 1.5 cents per gallon to around 40 cents per gallon.
The API reported weekly stocks grew 2.5 million barrels to 15.3 million, around 16.7 million higher than last year's build.
While an influx of Russian gas oil was also putting a lid on New York Harbor heating oil prices, gasoline arbitrage cargoes were also going to depress Harbor prices.
"Give it five to six days...then prices will be slaughtered," a trader said on the expected arrival of cargoes.
But other traders were more skeptical.
"There is a lot of talk of incoming cargoes but until I see them will I believe it. You won't be seeing these sort of premiums if the market wasn't tight," a trader said.
Harbor outright gasoline prices have actually fallen a quarter cent to around 45.60 cents per gallon, but reformulated grades differentials have risen by nearly 1.75 cents, climbing into a premium of around 1.25 cent to the NYMEX on Monday.
Conventional differentials on Monday also flipped to 0.25 cent over the NYMEX from a discount as low as 0.50 cent.
N.Y. Energy Futures Called Steady Ahead Of API
-- Wed, 14 Oct 1998 11:32 EST
--Crude oil futures expected to open steady to 5 cents either way
--Heating oil futures expected steady to 10 points higher
--Unleaded gasoline futures expected steady to 20 points higher
Crude oil futures and product futures are expected to open with a mixed tone here today in front of delayed weekly U.S. inventory data.
Most traders are looking for modest to large builds in crude oil stocks in tonight's weekly American Petroleum Institute (API) Report. The early range of trade estimates falls between a 500,000-barrel build to a 7-million barrel build. Traders have mixed opinions about gasoline stocks with most looking for a small draw as demand remains relatively robust. Heating oil stocks are seen rising over the past week.
There remains little fresh news to push prices in either direction as several factors have been pushed to the background ahead of the inventory data.
Technical support for November crude oil futures is seen at $14.05, $13.90, $13.78 and $13.28 with resistance seen at $14.35, $14.58, $14.80 and $15.00.
Technical support for November heating oil futures is seen at 38.30, 37.70 and 36.00 with resistance seen at 39.20, 39.90 and 41.10 cents.
Technical support for November unleaded gasoline futures is seen at 42.75, 41.65 and 40.00 with resistance seen at 44.10, 45.30 and 47.40 cents.
NYMEX Crude, Products Rangebound Midday
Crude oil and refined products futures traded rangebound at midday on Wednesday, with bearish sentiment prevailing ahead of the weekly inventory data, traders on the New York Mercantile Exchange (NYMEX) said.
At 1320 EDT/1720 GMT, November crude traded at $14.19, down four cents. The contract has been rangebound at $14.08/14.28 for most of the session.
Heating oil and gasoline products clung to small gains.
November heating oil was up 0.11 cent at 38.70 cents, up from its session low of 38.25 cents.
November gasoline was up 0.24 cent at 43.70 cents a gallon, below its session high of 39.10 centsThe American Petroleum Institute will release its inventory report for the week ending Oct. 9 after the market closes Wednesday.
Ahead of the data, traders and analysts polled by Reuters said they expected a large build of 4.875 million barrels in crude. They also predicted a small build of 666,000 barrels in distillate stocks, which include heating and diesel oil, and a similar slim increase in gasoline stocks of 687,000 barrels.
Those polled noted that the effects of hurricane-induced production disruptions in the Gulf of Mexico and refinery shutdowns on the Gulf Coast have largely eased"We're back to normal, the glut is still here," said Jason Chartrand, an analyst at Atlanta based GSC Energy.
Just two weeks ago, front month crude peaked at $16.36 a barrel on the NYMEX as the market assessed the effects of powerful storms that hit the U.S. Gulf Since then, crude has dropped more than $2 a barrel. Coinciding with crude's latest fall, Kuwait on Tuesday repeated its stand that OPEC ministers should be prepared for a third round of cuts -- if by OPEC's meeting on Nov. 25, Brent crude failed to rise to $17 a barrel.
Other producers, including OPEC's Algeria and non-OPEC producer Oman, have made similar remarks, but their statements were disregarded by oil traders.
In two agreements earlier this year, OPEC and non-OPEC producers pledged to remove a total of 3.1 million barrels per day (bpd) from the market -- a sacrifice they thought would lift prices. That has not happened as current prices are $6.00 to $7.00 a barrel below their peaks in 1997.
$1 Energy Comments NYMEX Natural Gas Futures To Open Firner Ahead Of AGA Data
-- Wed, 14 Oct 1998 13:13 EST
Natural gas futures are opening 2 to 4 cents higher this morning. In OTC trading, November natural gas futures are seen bid at $2.11 to $2.12.
Traders agreed the bounce away from $2 support on Tuesday was a positive short-term development. Several sources said they would not be surprised to see fresh selling develop in November futures at $2.13 to $2.15, if prices push up into that area this morning.
Most traders anticipate continued eager commercial buying interest to cover shorts on any further break back down toward key support at $2.00.
Traders are looking for this afternoon's American Gas Association (AGA) inventory report to show a build of 30 to 70 bcf this past week. Most estimates appear to be in the 50 to 65 bcf range. Last year there were 77 bcf in new injections.
Weather continues to be a negative factor for the market. Little increase in heating or cooling demand is expected in the near term.
Technical support for November natural gas is seen at $2.08, $2.03, $2.00 and $1.96, with resistance seen at $2.13, $2.21, $2.27 and $2.34.
Overnight in ACCESS trading, November natural gas futures traded up 2.9 cents to $2.113.
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