OIL AND NATURAL GAS PRICING SCENE - PART 1 WEDNESDAY AM 10/21/98
Venezuela says output cuts extension not official
CARACAS, Oct 20 - Venezuela's Energy and Mines Vice Minister Dolores de Torres said Tuesday that Venezuela had made no official agreement to extend oil outputs cuts beyond June 1999, but did not rule out that such a decision could be taken in the future.
The issue is largely moot because this government leaves office in February 1999 and any future decision would be taken by different officials.
Asked if there was a proposal to extend the oil cuts, which have taken about four percent off world oil output, she said: "Officially no ... there is nothing official, nothing in writing."
"If it is not decided...at the OPEC meeting or next year based on market studies to extend (the output cuts) then on the first of July little by little production will be reincorporated," de Torres added.
At a meeting in Cancun, Mexico earlier this month oil ministers from Venezuela, Mexico and Saudi Arabia said the output cuts might be extended by six months to the end of 1999, depending on oil market conditions.
While some Gulf oil producers have argued for extending the current agreement and even making further cuts, producers in the Americas such as Mexico and Venezuela have been reluctant to commit to an extension of the cuts.
IEA's Priddle says oil cuts not effective long term
LONDON, Oct 20 - The head of the International Energy Agency (IEA), the West's energy watchdog, said on Tuesday that he did not think cuts in oil production by OPEC members would be effective long term though he conceeded that recent curbs had helped to support prices.
"I do not think it is effective in the long term," Robert Priddle told reporters in London when asked if he thought another output cut by OPEC was on the cards when producers and consumers meet in Cape Town later this month.
Priddle, whose organisation is a strong proponent of free market forces, said that the Organisation of the Petroleum Countries succeeded in preventing a further slump in the price of oil by cutting 2.6 million barrels per day from the market to lift prices from a 10-year low.
But he said while the short-term objective had been reached, the risk of such "collusive action" by the cartel was loss of market share by driving oil companies away to countries where there were no restrictions to production.
Priddle, who had earlier presented the IEA's energy report on Britain, told a news conference that low oil prices were good for net importers in Asia but bad for industrialised nations trying to reduce emissions of greenhouse gases.
"On the positive side, the world financial crisis for net importers in Asia would have been much worse...but the energy import costs of these countries has risen by only five percent despite develuations in their currencies," Priddle said.
But he added that low oil prices were bad news on environmental grounds because they made it difficult "to convince consumers to use energy more efficiently", particularly in the transport sector.
Crude build in API as weather improves
NEW YORK, Oct 20 - Oil traders and analysts said on Tuesday they expected another buildup in U.S. crude stocks for the week ending Oct. 16, citing rising imports and normal offloading tanker operations at the Louisiana Offshore Oil Port (LOOP).
But that projected build may not be factoring in refineries coming out of turnaround.
Ahead of the weekly inventory report from the American Petroleum Institute (API), they also said the pace of refinery runs would pick up. But runs would still be relatively low, compared with the near or at full capacity level before a series of storms in September forced some refinery shutdowns, they noted.
Since the end of August until the week ended Oct. 9, the API statistics show a straight decline in refinery runs totaling 2.2 million barrels per day, from about 15.7 million bpd to 13.5 million bpd nationwide.
An upturn in utilization, however, would be consistent with information coming from oil companies about refineries coming out of maintenance or turnaround.
In a Reuters poll, the traders and analysts also said that distillates, which include heating and diesel oil, and gasoline, will show small stockbuilds.
But with demand not easy to ascertain, poll participants were divided on gasoline: half saw a slim stockdraw, and half expected an increase, with higher figures.
As for distillates, most of the forecasters saw a seasonal stockbuild.
The forecasters said they expected a build of 4.125 million barrels in crude stocks, 800,000 barrels in distillates and 1.875 million barrels in gasoline.
"Refinery runs are relatively low, while imports are strong and production has returned to normal in the Gulf of Mexico, now that weather has improved," said Jason Chartrand, an analyst at Atlanta-based GSC Energy.
Tom Bentz, an analyst at Cresvale International, agreed, adding that cargoes are being offloaded at the LOOP, which again had a full week of normal operations.
Jim Ritterbusch, a trader at Chicago-based Sweeney Oil, said he expected crude imports were high -- at up to 9.0 million barrels per day.
On gasoline, the participants saw an overall build of 1.875 million barrels. But they conditioned the prediction on how demand turned out.
"If the demand is low, say, 8.0 million barrels or lower, then there could be a build, while if demand were up 8.5 million barrels or more, there could be a draw, said Cresvale's Bentz.
Last week, the "implied demand" on gasoline was 8.9 million barrels based on the API data, which showed an unexpected large gasoline draw of 7.0 million barrels.
"The large draw should correct and I expect a smaller draw of just about 1.0 million barrels in gasoline," said a NYMEX trader, who added: "That should not be a surprise at all."
On distillates, the poll participants said they saw the build as seasonal.
The forecasters were unanimously bullish about refinery runs, saying they expected processing to be up 1.85 percentage points from the previous week's rate of 87.5 percent. Last week's rate was a drop of 0.5 percentage point. One trader said improving margins are encouraging refiners to continue with the relatively high runs.
Analysts: API data positive surprise, but confusing
New York-Oct. 20 -Weekly American Petroleum Institute (API) inventory data, released today, were termed a positive development for the crude oil and heating oil markets, but a bit disappointing for the gas futures.
However, traders noted some of the data were a bit confusing and they hope the Department of Energy (DOE) data early Wednesday clear up some of the discrepancies.
"Any given week, the numbers can be questionable," one analyst commented.
The API reported crude oil stocks were down 290,000 barrels to 327.863 million barrels. Most were looking for a build of 3 million to 6 million barrels in this week's report. One reason for the smaller build was an upward revision in last week's total stocks of nearly 800,000 barrels, pushing last week's stocks up over 9.0 million barrels to 328.2 million barrels. Total stockpile of crude oil compared to year-ago levels rose to a surplus of 26.85 million barrels, up from 23.5 million barrels last week.
Traders said some of the bullish implications of the draw on crude oil supplies were offset by a build of 2.6 million barrels of crude oil in PADD 3 inventories.
Crude oil imports rose 42,000 barrels this past week to 8.234 million barrels per day. Most were looking for imports to reach up toward 8.8 million to 9.0 million barrels. But the real surprise was that refinery operations fell 0.7% to operate at just 86.8% this past week, after dropping by a whopping 8.0% the prior two weeks. Most were looking for a 1% to 2% rise in operations, because of operations coming back on line following Hurricane Georges.
Gasoline stocks rose 384,000 barrels when most were expecting a draw of 1 million to 2 million barrels this past week. The small rise in gasoline stocks pushed the surplus up to 1.6 million barrels compared to a year ago, but still down from a surplus of more than 17.8 million barrels four weeks ago. Total gasoline stocks on hand now total just over 199.3 million barrels.
Implied demand for gasoline fell by about 400,000 barrels to 8.5 million barrels per day and that could leave the gasoline market vulnerable to some selling pressure, one analyst said. He said the build in RFG stocks was also negative for the futures. He said the problem is what will happen to the gasoline market when refinery times are increased, when refiners were able to extract more gasoline from less crude process this week.
Distillate stocks also fell by a larger-than-expected 2.37 million barrels to 147.1 million barrels. Overall stocks of distillates are now some 11.0 million barrels larger than a year ago, but still down sharply from the 24.0 million barrels of surplus stocks versus year-ago levels in the middle of August. Traders said the drop in distillates came from heating oil, as diesel fuel stocks were slightly higher.
This afternoon on NYMEX ACCESS trading, December crude oil futures are up 9 cents at $13.61 after falling 1 cent earlier today. December heating oil futures are up 25 points at 39.10 cents. December unleaded gasoline futures are up 11 points at 42.80 cents.
Tech Trends: Martens sees push below June lows in crude oil
Tue, 20 Oct 1998 16:03 EST
(Editors note: This is one in a series of FWN Technical Trends, in which top traders and technical analysts provide FWN with their latest insights on markets.)
Chicago-Oct. 20-FWN--Crude oil furures may have completed a three wave rally earlier this month, which points to a run toward the June lows seen on the weekly chart, said Jim Martens, senior commodity specialist at Elliott Wave International.
Looking at the weekly crude oil chart, futures rallied from the mid-June low at $11.42 in a "nice five wave movement to the July high at $15.00," Martens noted. That would represent "wave a." Activity from there looked like a "pullback in three waves to the mid-August low at $12.56," he added, representing "wave b".
From there, the market "rallied in another five wave sequence to the Oct. 2 high at $16.36," representing "wave c".
Using Elliott Wave analysis, Martens says the overall action was a "three wave rally, which Elliott tells us is corrective." From the early October high, "we've already seen the market drop over $3. The trend should remain downward."
Elliott Wave analysis utilize repeating wave patterns and the Fibonnaci number sequence in order to gauge market trends and targets. Ideally, Elliott patterns reveal a five wave advance with a subsequent three wave decline.
Pointing to the three wave rally formation, Martens noted in the development, "the two legs that move upward are approximately equal, which is something else that tells us that it is corrective."
On the recent sell off from the $16.30 area, Martens speculated "we are probably finishing the first wave of a new sequence to a new low beneath $11.42."
"Once the decline goes beneath $11.42, it appears that a five wave decline sequence beginning in December, 1996 will be coming to an end," he said.
On the downside, "the next support of any significance is from April, 1986 at $9.75. I wouldn't be surprised to see that lower level tested."
"We can be confidently bearish now, but I think we are approaching what may be a major low," he added.
Looking at the long-term charts, crude oil hit its lowest levels earlier this summer since April, 1986. From 1986 on, crude prices have slipped below $13 per barrel only one time until this summer. In today's activity, December crude futures have slipped within nearly a quarter of the $13.00 floor.
Venezuelan oil cut targets $18-19 Brent - Minister
CARACAS, Oct 20 - Venezuela's Energy and Mines Minister Erwin Arrieta said on Tuesday he was targeting a price for Brent Blend crude oil of $18 to 19 per barrel, but rejected the idea of further cuts in oil production to get there. He said new alliances were being forged in the world oil industry between companies with large markets and countries with big reserves, hoping to stimulate new markets and make room for all producers.
"Remember that the dream of the Organization for Petroleum Exporting Countries used to be $21 per barrel, but from now on, we are thinking about a price for Brent of $18 to $19 per barrel," he said, without specifying a time limit. He was speaking to reporters on the fringes of an oil conference here.
Other OPEC members, such as Kuwait, have suggested making more production cuts if Brent fails to rise to $17 per barrel by the OPEC meeting on Nov. 25.
In London, on the International Petroleum Exchange, the December Brent futures contract last traded down three cents at $12.36 a barrel on Tuesday.
"To get there, we have to do many things without poisoning ourselves with new cuts," Arrieta said, adding: "Supposing the market required (more cuts), we would meet and analyze that, but at the moment there has not been any such proposal."
Venezuela, working with fellow OPEC member Saudi Arabia and non-OPEC producer Mexico, helped spearhead agreements this year to cut global oil production by about 4 percent in an effort to boost sagging prices.
Arrieta said there had been a shift in strategy away from production cuts toward forming alliances with international companies to seek new markets.
"I can't let the cat out of the bag, but there are surprises for everybody in store, where different companies and different countries would enter into alliances, not mergers, but looking to increase space in the market so there is room for everybody," he said.
Venezuela's state oil company President Luis Giusti said in a recent interview that he could imagine Petroleos de Venezuela SA (PDVSA) forging an alliance with a multinational on the scale of the merger of British Petroleum Co. Plc <BP.N> and U.S.-based Amoco Corp. <AN.N>. PDVSA has already signed a number of downstream alliances, usually involving crude oil supply, refining and products marketing, such as those with Amerada Hess Corp. <AHC.N> and Phillips Petroleum Co. <P.N>.
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