CRUDE OIL/PART 1 - International In Scope
10/31 02:18 US Crude Outlook -Hurricane, OPEC To Provide Boost
NEW YORK, - U.S. crude prices look set for a rally over the coming days, sparked by a powerful hurricane and signs that the recent flood of imports may soon slow to a trickle, traders said on Tuesday.
Expectations that crude prices would spend the next several days climbing higher came hard on the heels of an 18-cent burst on Monday, which took December West Texas Intermediate/Cushing prices above $14.25 a barrel.
U.S. crude traders said further gains should be around the corner, even though few anticipate OPEC ministers meeting later this week on the sidelines of a conference in Cape Town, South Africa, to reach another agreement on production cuts.
Indeed, Mexican Energy Minister Luis Tellez on Monday threw cold water on any lingering hopes of another production cut when he said that discussion would focus on compliance rather than new supply sacrifices.
But Kuwaiti Oil Minister Sheikh Saud Nasser al-Sabah offered a different view on Tuesday, vowing to support another round of production cuts.
OPEC producers have reached two production-cutting accords already this year, helping pull prices off 12-year lows of under $11.60 a barrel in June. U.S. crude prices eventually climbed to over $16.00 a barrel in late September.
But the gains were also due to a series of storms that pounded the U.S. Gulf of Mexico during the month, and with the fiercest hurricane of the season now swirling in the Caribbean, crude traders are keeping a close watch on potential supply disruptions.
"If this storm tracks north, the races will be on," one trader said.
In advance of Hurricane Mitch, which has sustained gusts of 180 mph, Mexico's state-owned oil company Petroleos Mexicanos (Pemex) said it had brought 80 percent of its offshore workers in the Campeche Sound back to shore on Monday.
U.S. sour crude prices received an immediate boost, and look set to remain supported until the storm's threat to supply passes. West Texas Sour/Midland prices have jumped by about 10 cents a barrel over the last several days, hitting a discount of $1.55 to WTI/Cushing.
Sweet crude has also made gains as stronger Dated Brent prices in Europe have closed down the arbitrage to bring North Sea crudes into the U.S. Gulf Coast.
Light Louisiana Sweet/St. James, the crude which competes most directly with North Sea Brent, found offers at no better than 10 cents under the benchmark on Tuesday.
"It's a combination of Dated Brent tightening, so the arbitrage is shutting down, and a certain amount of concern over West African supply," one trader said, in describing the jump in LLS differentials.
In Nigeria, violence has caused regular disruptions to oil supply over recent weeks as youths continue to protest against the government and oil companies.
Still, most U.S. traders claim that November and December crude shipments from the West African nation to the U.S. Gulf Coast haven't yet been significantly cut. Nigeria's Forcados is being discussed around 10 cents over Dated Brent, while Bonny Light and Qua Ibo are being valued at 10 to 15 cents over the international benchmark.
U.S. traders will also spend the next several days sorting out Colombia's latest Cusiana tenders, which were due to be awarded last week.
Several traders said Monday that state-oil company Ecopetrol didn't award the two tenders, each for about 1.1 million barrels.
For the moment, they added that Cusiana is being notionally assessed at $1.50 a barrel under WTI/Cushing.
10/31 02:19 US Products Outlook - OPEC, Mitch Support Sought
NEW YORK, - The return of U.S. refineries from autumn turnarounds continued to bear down on the outlook for oil products, but some bullish traders looked to the meeting in South Africa this week of OPEC producers, Hurricane Mitch and weakening refining margins for support.
Sun Co. Inc. <SUN.N> restarted its 177,000 barrel-per-day (bpd) crude distillation unit at its Philadelphia refinery on Sunday, just part of around 430,000 bpd of production to return from maintenance shutdowns in the past week.
"The weekly American Petroleum Institute (AP) should show higher refinery runs...nothing else is very certain, so they'll be watched closely," said an analyst.
With the exception of heating oil prices in New York Harbor, both gasoline and distillates fell last week with Gulf gasoline registering the largest drop of 2.20 cents per gallon to 39.40 cents.
"Refineries coming back can only add to gasoline's glut," said one Harbor trader, although he added that short supplies of blending components for gasoline could limit builds in the API stock numbers to be released late on Tuesday.
Distillates in the Northeast were supported as traders with storage took advantage of the contango in the market to buy the cheaper prompt supplies of the heating fuel, lifting outright prices by over a penny to around 38 cents per gallon.
But lower product prices on the Gulf Coast in the last 15 days have cut refining margins in half to 28 cents per barrel of benchmark West Texas Intermediate crude processed, according to Reuters' calculations, based on standard product yields.
"Cracks look awfully cheap, especially on the prompt No.2 oil," a trader said. "I don't see any appreciable rise in runs this week."
Other traders were loathe to make predictions as long as there was a slight possibility that another hurricane could hit the Gulf Coast.
Hurricane Mitch, one of the strongest Atlantic storms ever recorded with sustained winds of 180 miles per hour -- considered a strong Category Five hurricane -- spurred some concern in the market.
But the National Hurricane Center said on Monday afternoon that Mitch, located in the western Caribbean, is not likely to reach the Gulf of Mexico.
"If it stays on its current course, very little impact on oil," one analyst said. "However, it looks like Mitch is going to move very slowly and direction is unclear. One forecast has it turning north, maybe into Mexico's Gulf of Mexico waters where there is significant oil production, and quite possibly later aiming at the U.S. Gulf Coast.
"Forecasters don't seem concerned yet, but this bears watching."
An informal gathering of OPEC ministers later in the week on the sidelines of an energy conference in Cape Town, South Africa, was also expected to keep sellers at bay despite much skepticism on further crude production cuts.
"With OPEC and Hurricane Mitch threatening, nobody is going to sell short and prices will be supported this week. But in the long term, I am bearish that the oversupply of crude is going to drag down prices," a trader said.
CLOSING N.Y. ENERGY COMMENTS
Futures: Mostly Firm; November Products Expire
New York 15:43 EST Oct. 30-FWN Energy Futures closed mostly firmer here today as the markets rallied ahead of the expiration of November product futures, sources said.
Short covering was noted at the end of the session as firming up the markets.
After trading lower to sharply lower this morning, the energies staged a bounceback to around steady levels this afternoon.
A NYMEX floor trader said Refco was a good buyer in December crude oil. Volume was termed as moderate.
The buying lifted crude and heating oil to near-steady levels, and unleaded gas had also trimmed a good part of its sharp losses.
Prices extended their gains, however, eventually taking the markets into positive territory toward the end of the session on fund buying and short covering.
"It was all fund buying," one NYMEX floor source said. "The products started lifting up and then they kicked in some of the funds. The funds started buying the market up. I'm not really sure if they're covering some of their shorts or what is going on. I haven't seen any fundamental news."
Another source said, "That was really it. There wasn't much news to push this market around today.
"There was a lot of short covering at the very end there," he added.
The expiry of November product futures added to some of the late volatility in prices, sources noted.
November unleaded gasoline expired today at 45.17 cents, up 27 points. November heating oil expired 46 points higher at 38.82 cents.
Comments coming from the Capetown, South Africa, meeting of oil producers had little, if any, effect on the market, sources said.
Mexico's largest crude exporting terminal, the 575,000 barrel-per-day (bpd) Cayo Arcas refinery, was expected to re-open today after Hurricane Mitch-related shut-ins, GNI said.
Also, a 240,000 bpd Bayway refinery is expected to resume operations this weekend after a six-week shutdown.
On the charts, December crude sees resistance at $14.45, today's high, then again at $14.60. Support is found at $13.86, today's low.
December heating oil sees resistance at 40.29 cents. Support is put at today's low of 38.55 cents.
December unleaded gas sees resistance at 44.71 cents. Support is put at today's low of 42.85 cents.
December crude oil settled 18 cents higher at $14.42. December heating oil settled 39 points higher at 39.86 cents and December unleaded gas settled 24 points higher at 44.17 cents.
CLOSING N.Y. NATURAL GAS FUTURES: SLOW GRIND LOWER
New York 15:36 EST Oct. 30 - DECEMBER NATURAL GAS FUTURES ended lower today as prices slowly fell throughout the day amid bearish market factors.
A lack of demand in the cash market pressured the futures today, an analyst said. He also noted a lack of weather demand for next week as being negative for the market.
Expectations for a build in next week's American Gas Association (AGA) storage report also pressured the futures market, he noted.
"There were expectations for a build--to keep a storage build coming into next week--not a high build but around 10 and 40 (billion cubic feet)," the analyst said.
December natural gas opened down slightly, but steadily traded lower throughout the morning. It closed at the session low of $2.265, down 8.3 cents on the day.
Volume was light until the December broke through the $2.30 level, the analyst said. "That's where we saw the most volume. Other than that there hasn't been a lot of volume."
Concerns this week over then-Hurricane Mitch subsided as the system is now a tropical storm with maximum wind speeds of just 40 miles per hour (mph).
Mitch is currently inland over Honduras drifting west-southwest at 3 mph. A slow westward drift is expected for the next 24 hours, according to the National Weather Service in Miami, Fla.
Forecasters say, however, if Tropical Storm Mitch makes its way across land and heads back into open waters, it could reform and gain strength.
Another source said today's lower prices were an effort to get the futures price more in line with cash.
"The natural gas futures price is relatively overvalued. As a result, what's going to happen is that price will come off to meet the cash at some point, since demand is not very high and inventories are more than adequate," he said.
The American Gas Association reported Wednesday that estimated working gas levels in underground storage rose 36 billion cubic feet (bcf), which fell within expectations of a 25 bcf to 50 bcf rise. The rise in storage continues to be burdensome on the market, the analyst noted.
December natural gas futures see support at $2.259. Resistance is pegged at $2.383, then at $2.419.
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