OIL AND NATURAL GAS PRICING SCENE - PART 1 SATURDAY AM 10/17/98
NYMEX oil, products ease at close after Tosco fire
Crude oil and product futures ticked up in late trading and eased near the close Friday on news of a tank fire at Tosco Corp.'s <TOS.N> Trainer, Pa., refinery in the afternoon, traders said.
"Crude, products, everything went up on rumors on the NYMEX floor of a fire at the plant," said a NYMEX trader.
After a Tosco spokesman said the fire was limited to a tank and that production was unaffected at the 150,000 barrel-per-day (bpd) refinery, prices eased.
November crude oil settled at $14.15 a barrel, up 10 cents. The front-month contract had remained stuck in a range most of the day, hitting $14.31 as its session high early, but moving lower in the afternoon, to $14.10, from $14.13.
At $14.15, the contract was 29 cents lower than its closing on Monday and 43 cents below where it was a week ago.
November gasoline pared earlier gains, ending at 44.18 cents a gallon, up 0.27 cent. Traders said November gasoline eased on spread trading, which favored the December contract. Its Friday settlement was 0.68 cent higher than its close on Monday, but down 0.25 cent from a week ago.
November heating oil rose, settling at 39.12 cents, up 0.96 cent, but easing from its session high of 39.40 cents. The contract, which moved along with crude most of the day, ended up 0.52 cent from Monday and down 0.68 cent from a week ago.
In London, November Brent ended at $13.12 a barrel, up 13 cents, near the bottom of the day's narrow $13.10/13.27 range.
On other refinery news, Chevron Corp. <CHV.N> said its flood-damaged refinery and petrochemical plant at Pascagoula, Miss., will restart sometine in November.
The refinery, which was shut down on Sept. 27 as a precaution against Hurricane Georges, will remain shut through October and would start beginning in November, said spokesman Steve Renfroe. He did not specify the exact date.
The 295,000 barrel-per-day (bpd) plant was one of seven Gulf Coast refineries that temporarily shut ahead of Georges.
On Thursday, November crude ended flat at $14.05, after it clawed itself back from $13.88, where it fell in reaction to the latest weekly inventory data showing U.S. crude stocks rose by 8.2 million barrels last week to 327 million barrels.
The latest crude data heightened anxiety over the already overstocked crude market, which factored in the anticipated build on Wednesday, ahead of the report from the American Petroleum Institute. This week, the API data was released late Wednesday, a day later than usual, because of the Columbus Day holiday on Monday.
Gasoline unexpectedly showed a big stockdraw of 7.0 million barrels, reducing inventories to 199 million barrels. That whittled down year-on-year surplus to just 992,000 barrels.
Distillate inventories, which include heating and diesel oil, were down 1.7 million barrels, cutting inventories nationwide to 149.5 million barrels, still near 11-year highs.
The U.S. Department of Energy, in its own inventory report Thursday, also delayed by a day due to the federal observance of Columbus Day, put the crude stockbuild at 6.8 million barrels. It also reported draws of 2.0 million barrels in distillate and 7.6 million barrels in gasoline.
Meanwhile, traders said they were watching for developments at an international energy conference on Oct. 29 in Cape Town, South Africa.
As of Friday, the oil ministers of Saudi Arabia, Venezuela and Mexico, the countries that spearheaded producers' agreements to cut output by 3.1 million barrels per day earlier this year, have confirmed their attendance.
Kuwait, which has been pressing members of the Organization of Petroleum Exporting Countries to considere a third round of production cuts to raise oil prices, will also be attending, along with other OPEC members.
London oil limps higher after long losing streak
London oil prices edged higher on Friday after dealers decided that a seven-day price slide had gone far enough.
London Brent futures for December loading closed 12 cents up at $13.12 a barrel, stemming the recent market fall which had foiled producers' hopes that a sustained recovery was under way.
September's rally from 10-year highs was left in tatters this month as the impact faded from a series of supply disruptions centred on hurricane-hit U.S. Gulf of Mexico operations.
''We've seen prices fall seven days on the trot so it's no surprise that it's picked up a little today,'' said a futures broker in London.
''But I wouldn't read too much into it for the longer term. There's still too much supply on the market.''
The sustained slide has put the focus back on producers to take action as a conference between suppliers and consumers nears in Cape Town at the end of October.
While three million barrels per day (bpd) of producer cuts has helped reduce a vast stockpile, analysts say the threat of worldwide economic slowdown means more sacrifices may be needed.
OPEC member Kuwait on Tuesday indicated it would push for the producer club to increase oil output cuts beyond their present 2.6 million bpd. Algerian Energy Minister Youssef Yousfi also this week raised the prospect of further cuts.
But OPEC big guns, Saudi Arabia and Venezuela, at the helm of this year's producer deals, have said they do not want to make further reductions.
And an Iranian official told Reuters on Wednesday that Tehran would prefer to defer any decision on further cuts until it becomes clear how much support the market draws from winter demand.
The official suggested it could be too early to form an accurate assessment of the strength of winter demand by OPEC's next ministerial conference on November 25.
Oil traders are now watching closely to see if the vast U.S. market -- which devours around a quarter of all world oil supply -- can make further dents in its inventory overhang.
Prices in dollars per barrel:
.........................................................Oct 16..........Oct 15
.........................................................(close).........(close)
IPE December Brent.........................$13.12..........$13.00
NYMEX November light crude.........$14.12..........$14.05
North Sea December Brent stable in late U.S. trade
December North Sea Brent prices were steady in thin late U.S. trading, dealers said Friday.
December Brent was assessed at $13.13 a barrel in the aftermarket, a cent above where futures closed earlier in the day on the International Petroleum Exchange (IPE).
While no full cargoes were said to have changed hands, two 200-lot partial cargoes traded at $13.12 a barrel, a 200-lot partial traded at $13.13, and a 100-lot partial traded at $13.13 a barrel. In addition, the Brent November-December spread traded at minus 37 cents.
NYMEX crude unchanged
Crude oil futures prices were unchanged from Thursday on the New York Mercantile Exchange after tumbling sharply in the previous session.
Oil prices plunged Wednesday to their lowest level in six weeks before rebounding some. The decline was driven by traders' predictions that U.S. inventories were replenished last week with imports.
Crude oil futures fell in advance of weekly supply figures from the American Petroleum Institute, which showed continued gains in energy stockpiles.
The API report, released after the close of Wednesday's trading, found crude oil stocks rising 8.220 million barrels last week to 327.351 million barrels. Gasoline stocks fell by 7.023 million barrels.
Inventories were refilled after bad weather subsided in the Gulf Coast, allowing the resumption of import deliveries.
World oil producers have reduced pumping in an effort to drive prices higher, but their attempts have so far been unsuccessful. Crude prices are running about 30% below year-ago levels.
U.S. cash crude closes bearish week on steady note
U.S. cash crude prices shuffled sideways Friday, bringing to a close a week in which the bears took firm control of the market.
After two straight days of heavy losses, Light Louisiana Sweet/St. James and West Texas Sour/Midland steadied on Friday in light trade.
Slightly stronger New York Mercantile Exchange crude futures helped pull outright prices higher, however. The November contract settled at $14.15 a barrel, up 10 cents. Earlier in the session, the front-month November contract struck a high of $14.31 a barrel.
In the cash crude market, traders were quoting benchmark West Texas Intermediate/Cushing at about $14.20 a barrel.
But trade for all cash crude grades ground to a near standstill before the weekend.
Light Louisiana Sweet/St. James was notionally quoted at between 53 and 45 cents below WTI/Cushing, about where it left off on Thursday but still some 20 cents down on the week.
Its sister grade, Heavy Louisiana Sweet/Empire, was said to be holding on either side of $1.00 under WTI/Cushing Friday, which also marked a loss of about 20 cents a barrel this week.
West Texas Sour/Midland, which has suffered the sharpest losses over the past several days, was placed at between $1.60 and $1.55 under WTI/Cushing.
West Texas Intermediate/Midland was discussed on either side of minus 30 cents a barrel after trading at that level earlier in the day.
With the spread between November and December futures sitting between 20 and 16 cents a barrel, WTI/Cushing postings-plus was assessed at about $2.38 a barrel.
U.S. West Coast crude differentials stable
U.S. West Coast spot crude oil differentials were stable on Friday with no fresh deals reported, though notional prices rose a little in line with modest gains for NYMEX crude futures following losses earlier in the week.
The last deal for Alaska North Slope (ANS), the most important crude on the West Coast, was done on Friday of last week at a discount of $1.025 a barrel to the benchmark U.S. crude, West Texas Intermediate (WTI).
The notional price for West Coast ANS at the same discount rose to $12.45/62 a barrel from $12.39/54.
A couple of oil firms cut their posted prices for West Coast crudes by 50 cents a barrel this week, bringing their prices more into line with companies that had implemented cuts earlier.
Dealers expected a slow start to next week, with many of them scheduled to take part in an industry golf event.
One seller of ANS said he would not be surprised to see the entire week pass without a fresh deal.
"We think the next piece of business we do will be for December delivery," he said.
Another dealer said some deals for November delivery could still emerge but that potential buyers were not in a hurry.
"Refinery margins are so bad that many of them are cutting runs...For the first time in five or six months it's a buyer's market," he said.
The same dealer said he expected the next deal for ANS to be done at a discount of $1.15 to $1.20 which would mark a further widening from the narrow spreads seen last month.
U.S. foreign crude - Mesa trades at WTI -$2.32
Traders said the U.S. market for imported crudes was mixed on Friday, as details about the latest Cusiana tender were still unavailable, but Mesa Furrial and Cano Limon were sold at steady to slightly lower prices.
LATAM - COLOMBIA, VENEZUELA, ECUADOR
-- Traders said they had still not heard details about a tender of the light sweet cargo of Cusiana, for which bids were due earlier this week. Although one trader cited rumors that the cargo had been awarded at a discount of $1.30 under West Texas Intermediate, other traders said offers for the cargo had been around minus $1.55.
Previous deals for Cusiana were around $1.29-1.25 under WTI, but sweet crudes have been under pressure from talk that a U.S. trader is bringing over several large ships carrying North Sea Brent.
-- Colombia's state-owned oil company, Ecopetrol also awarded a tender for a cargo of medium heavy Cano Limon scheduled to load in late-October this week. The October 26-27 cargo was reportedly awarded at $2.29 under WTI, traders said.
-- Venezuela's sour crude Mesa/Furrial traded around $2.32 under WTI earlier this week, a slight weakening, regional traders said.
-- Traders said that November arrival barrels of Ecuador's sour crude, Oriente were being offered into the U.S. Gulf at $2.60 under WTI.
NORTH SEA, WEST AFRICAN
-- Talk of several Ultra Large Crude Carriers (ULCCs) of Brent heading for U.S. markets has kept the pressure on sweet crudes in the U.S., traders said. Brent has also weakened, and is currently on offer around a dollar under WTI, Gulf Coast traders said.
There has been a lot of speculation in the market about where the trader bringing in the unusually large volume of Brent will place the barrels. On Friday, one trader estimated that at differentials around a dollar under WTI, the trader could economically consider putting the Brent into Cushing, the delivery point for the New York Mercantile Exchange's crude oil future contract.
-- But talk of the Brent is also pressuring differentials of sweet West African crudes, and traders said on Friday that delivered prices of Nigerian Bonny Light were around $1.30 under Dated Brent.
Continued disruptions in Africa's largest producer of crude, Nigeria, had only a limited supportive effect on African grades in the U.S., traders said.
"That hasn't done a thing to this market," said one trader. "The problems in Nigeria are influencing prices of barrels arriving in the latter part of November. But as far as the Gulf Coast market goes, it is just kind of shrugging it of," the trader continued.
Three people were killed in Nigeria in Friday's riots in the southern oil town of Warri, and tension is building in the country. After four Chevron workers in the West African country were taken hostage, Nigeria's military rulers issued a strongly-worded warning that further disruptions to oil production would not be tolerated.
At least one-third of Nigeria's oil output, which averages two million barrels of crude per day, has been shut in during the past two weeks by demonstrating youths.
U.S. spot distillates firm, Tosco-scare shrugged
The U.S. spot products markets had a scare Friday afternoon with a fire at a Pennsylvania refinery, but the market, already thinned out by an industry outing, shrugged off the news as only a storage tank was affected.
Distillates in New York Harbor and Gulf Coast however ended half to a penny firmer as demand picks up on cooler weather in the northeast and refineries in the south getting caught short ahead of scheduling on the pipeline.
The fire that broke out at Tosco's <TOS.N> Trainer, Pennsylvania refinery Friday afternoon was limited to one tank at the refinery's tank farm and did not affect production, a Tosco official said.
The fire at the approximately 150,000 barrel per day Trainer refinery, which is along the Delaware River just outside Philadelphia, occurred at the 154 tank, the official said. She did not say how the fire started or how many tanks Tosco has at the refinery.
Also on the refining news, Chevron Corp.<CHV.N> said its flood-damaged refinery and petrochemical plant at Pascagoula, Mississippi, will restart sometime in November.
The 295,000 barrel-per-day oil refinery also includes a petrochemical units which produce 135 million gallons a year of benzene and 1.0 billion pounds per year of paraxylene.
Chevron was one of the seven refineries in Louisiana and Mississippi that shut down as a precaution against the hurricane that stormed through the U.S. Gulf Coast on Sept. 28, but it was the only one directly damaged.
British Petroleum Co. Plc's 250,000 bpd Alliance refinery at Belle Chasse, La., which also shut on Sept. 27 but was unaffected by the hurricane, had a fire at its crude unit during its restart. The crude unit was slated to restart mid-week, and earlier on Friday, a company spokesman said the plant was back to normal operations.
On the NYMEX, oil futures rebounded but heating goil led the gains with November heating oil settling up 0.96 cent per gallon at 39.12 cents, gasoline up 0.27 cent to 44.18 and crude settling 10 cents per barrel up at $14.15.
GULF COAST
Activity on the Gulf Coast trickled down ahead of the weekend with most traders already absent for industry meet.
But prompt heating oil held onto and extended its early day gains as refiners were caught short ahead of scheduling. But no talk was heard by the market close.
Front 30 cycle heating oil gained a penny as it traded up to a 0.50 cents discount, with most of its strength on the back of the scheduling of the front 30 cycle of low sulphur diesel later on Friday.
Low sulphur diesel which rose over 0.50 cent on Thursday, ended 0.85 cent firmer with last trades at a 2.85 cents premium, although coming off the day's highs at 3.50 cents.
Jet fuel 54-grade's back 30 cycle traded 0.25-0.50 cent higher at 3.50 cents premium.
On the gasolines, both front 30 cycle of conventional M3 and M4 were scheduling but more activity was heard on the M4 which traded at a 2.60/2.75 cents discount. M3 was pegged at 2.00/2.25 cents discount.
Reformulated A-grade were done at a 1.50 cent regrade to the M-grade, while premium RFGs were offered at 2.25 cents over the print. Premium conventional V-grades were bid at 1.50 over the print.
NEW YORK HARBOR
Heating oil firmed, especially in the outer months, as storage space is still available, and as players started to think about draws at the beginning of the heating season, traders said. Traders said the Conoco outing in the Gulf Coast also took many players out of the market.
Prompt heating oil was slipped 0.25 cent to 1.25/1.00 cents under the screen. Any month traded as firm as 0.50 under the screen.
Low sulphur diesel held 0.25 point gains from earlier in theweek and was pegged at 2.75 to 3.00 cents over the screen.
Prompt M4 Harbor gasoline was steady, pegged at 1.50/1.25 cent under the November screen, amid thin trade, players said. One trader traded Laurel Pipeline M4 grade at 1.50 cents under.
Jet fuel 54-grade was steady at 5.25/5.50 cents. Jet-kerosine 55-grade was pegged at 5.75/6.00 cents over, traders said.
Meanwhile A4 regular reformulated held it's Thursday 0.20 cent to 0.40/0.50 cent over on poor refining economics for the product.
On the premium grades, conventional V4 was pegged at 2.75/2.95 cents premium and D4 RFG was pegged at 4.75/5.00 cents premium.
MIDCONTINENT
Group Three low sulphur diesel rose on the back of the Gulf Coast, sources said.
Low sulphur diesel in the Group was pegged up to a quarter to half a cent firmer at 3.50/3.75 cents premium after trading at 3.60 cents. Chicago was assessed unchanged at 2.40/2.70 cents premium.
Group regular unleaded gasoline was however a shade weaker, trading 0.20 cent lower at a 1.70 cent discount. Chicago's regular gasoline ended a quarter firmer at 2.50 cent under the print.
Premium grades in Chicago were pegged at a 5.75/6.00 cent regrade, Group at 3.10/3.35 cents premium.
Jet fuel in the Group was at 4.75/5.00 cents over the print, Chicago at 5.75/6.00 cents over.
Closing natural gas: Despite weak cash, closes at highs
The natural gas futures traded in a relatively narrow trading range here today.
But traders were surprised or impressed by the ability of futures to close higher and up near session highs, despite cash prices falling as much as 10 to 20 cents ahead of the weekend.
Futures opened lower and down into support marked by this week's lows and quickly rebounded. The rally lacked much enthusiasm and once prices failed to take out the highs from Thursday, the selling increased and pushed futures back into the negative column. Prices were stuck in a narrow range at midsession and moved higher the last two hours of trading to close up near session highs this afternoon.
November futures closed up 1.4 cents today at $2.109, just off the day's high at $2.120.
"This is just the calm before the storm," one Houston-based trader said this afternoon. He expects volatility to start to increase again next week after slumping sharply this week. He said the technicals in the natural gas market have been giving some false signals ever since the spike to $3.50 last fall.
It may be that there is more confusion or maybe it's just that these markets are maturing and becoming more efficient, he said. He noted some companies are simply getting out the business or reducing futures trading activities, because of the irregular price swings of the last year.
He said the market is likely to go up and test the downside gap left from Monday this week at $2.180 to $2.160 and may even make it back to $2.230 before heading back down to test this week's lows at $2.030. He expects to see the $2.000 level broken in the next few weeks as there is little sustained weather to support demand. In addition, he looks for gas storage stocks to build in the next few weeks and be on a pace to reach new records before the injection season.
Gas stocks need to average only 50 billion cubic feet (bcf) per week to reach the 3,100 bcf record.
The market continues to be driven as much by the lack of any weather on the horizon to lift prices as it does by the negative chart formations.
"It's pretty straight forward," commented a West Coast gas trader. He said the market is likely to wait to see what kind of weather is behind this weekend's cold front before making its next move.
If there isn't any colder weather behind this cold front, then the market is likely headed for $1.90 basis November. If there are some colder temperatures behind this weekend's front, then he said he expects prices to at least fill the downside gap created Monday at $2.16 to $2.180.
After the close, the National Weather Service (NWS) released its latest 6- to 10-day forecast and traders said that could be a negative factor for the market, because it signals generally normal to above-normal temperatures for much of the nation.
MORE FROM 2ND SOURCE
NYMEX November natural gas slips late but holds support
NYMEX Hub natural gas futures mostly moved lower late Friday in sluggish trade, but short covering helped spot-November hold above key support despite a crumbling weekend cash market, industry sources said.
At 1400 EDT, November was still down 1.5 cents at $2.08 per million British thermal units after trading this morning between $2.05 and $2.12. December was 1.7 cents lower at $2.33. Most other months were flat to down slightly.
"I think the fact we couldn't close the gap (in November at $2.16-2.18) this week was a bearish signal. We're holding support, but I wouldn't want to be on the buy side here," said one Texas-based trader, adding if colder weather did not arrive soon, futures were likely to move lower.
With 12 days left until the November expiration and paper now carrying almost a 50-cent premium to cash, traders said the gap had to narrow soon. And unless much colder weather kicks in, most expected futures to give ground.
Traders said futures were supported today by revised forecasts for cooler Midwest and Northeast weather later next week and some short covering when an early attempt to move lower stalled ahead of key support.
WSC expects slightly above normal temperatures Friday in the Northeast and Mid-Atlantic to climb to as much as 12 degrees F above normal Sunday through Tuesday. The Southeast will climb to four to eight degrees above normal early next week, while Florida will average one to four degrees above normal for the period.
Normal to much above normal readings in the Midwest will dip to normal or below Sunday through Tuesday. The mercury in Texas mostly will range from normal to slightly above, while the Southwest will see temperatures one to 10 degrees below normal into early next week.
Chart traders noted November this morning again held support in the $2.03 area. Further support was pegged at $2.015 and then in the mid-$1.90s, a measurement from Monday's gap. Interim resistance was still seen at the $2.16-2.18 gap, then at $2.25 and then in the $2.40 area.
In the cash Friday, Gulf Coast quotes on average skidded about a dime to the $1.60 level. Midwest pipes tumbled more than a dime to the high-$1.50s to $1.60 area. In the West, El Paso Permian lost 15 cents to the low-to-mid $1.60s.
Gas at the Chicago city gate on average was almost 10 cents lower at about $1.80, while quotes in New York lost a similar amount to the low-$1.80s.
NYMEX said 31,917 Hub contracts traded at 1325 EDT.
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