IN THE NEWS / Crude Oil Markets 2
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12/08 20:40 ACCESS energy prices rise on technical rally
12/09 05:31 U.S. Product Outlook-Cool temps eyed to raise heat
12/09 06:08 FOCUS-Kuwait says compliance key for more oil cuts
12/09 10:27 NYMEX crude edges higher as Iraq blocks U.N. team
12/09 11:27 FOCUS-Gulf Arabs agree to prolong oil output cuts
12/09 10:51 World Oil prices edge up on extended Gulf output curb
12/09 11:06 U.S. cash crude drifts lower with benchmark WTI
12/08 20:40 ACCESS energy prices rise on technical rally
LOS ANGELES, Dec 8 - U.S. energy futures prices fell in ACCESS trade Tuesday, after Gulf Arab producers leaned away from a fresh round of production cuts to stem falling oil markets, traders said.
Key inventory data, meanwhile, pushed prices lower by showing increases in U.S. weekly supply on gasoline and heating oil.
By 1730 PST on ACCESS, the January crude contract fell to $11.22 a barrel, compared with a NYMEX close of $11.30. Volume reached 1,507 lots for all traded months.
The January heating oil contract eased 0.08 cent a gallon to 32.44 cents a gallon in ACCESS trade after closing 0.22 cent lower on NYMEX at 32.52. Total volume reached 251 lots by 1750 PDT.
The January gasoline contract dropped 0.66 cent a gallon on ACCESS, trading at 34.05 cents, with 37 lots changing hands in January and 67 lots for all months.
12/09 05:31 U.S. Product Outlook-Cool temps eyed to raise heat
NEW YORK, Dec 7 - All eyes in the U.S. oil products cash market will be on the weather this week, as temperatures are forecast to head back to seasonal lows, and come to the rescue of low heating oil prices, traders said.
"There is no weather...any weather will be a relief," a Gulf Coast market source said.
Heating oil, which is supposed to drive the market during the winter, started with a handicap of record high inventories at the beginning of October.
Although nationwide distillate inventories were 4.0 million barrels away from the peak in the last week of November, they have been on the rise in November to 148.7 million barrels, or 14.2 million higher than a year ago, according to the American Petroleum Institute.
And the industry expected the build to continue, extending the squeeze on storage as the Northeast region -- the winter heating oil consumer hub-- was faced with above normal temperatures.
"If we can finally get some cold weather, we can get demand going," a trader said.
The Weather Services Corp. forecast that this week, "temperatures will be much cooler than in recent days over the Plains, Midwest, and Northeast, averaging near to somewhat below normal overall". High temperatures made heating oil the bear of the barrel last week, melting outright prices in both New York Harbor as well as the country's refining hub on the Gulf Coast, by 1.00 to 1.50 cent per gallon to 28.22 and 30.22 cents respectively. The heating oil cracks on the New York Mercantile Exchange also dipped while refining margins on the Gulf Coast slipped to back below $1.00 in the negative at the close of trade on Friday.
"The NYMEX has bounced back from its lows last week, and will try to trade sideways to higher but it will take substantial rallies to break downtrend," a Gulf Coast trader said.
Crude oil futures in New York and London plunged to 12-year lows last week after the Organization of Petroleum Exporting Countries (OPEC) failed to take supportive steps to shore up depressed oil prices at its winter meeting in Vienna in late November.
"The heating oil and kero markets are the pits - the problem is still much more where to put it than where to find it. This fact is key to the current market for U.S. products," said one analyst.
Gasoline in comparison was slightly supported as some traders sought its barrels for contango storage but was generally dragged down by its own growing surplus of 206 million barrels.
"The market is trying to move higher on the board but there is just plenty of supply," a source said.
12/09 06:08 FOCUS-Kuwait says compliance key for more oil cuts
ABU DHABI, Dec 9 - Kuwaiti oil minister Sheikh Saud Nasser al-Sabah said on Wednesday that Gulf Arab oil states would be willing to extend existing oil supply curbs to help the troubled petroleum market if other producers did the same.
But the Kuwaiti minister, a leading advocate of fresh output reductions, said the key to further measures by big Gulf oil producers was full compliance by fellow producers with existing limits.
Asked if there was Gulf Cooperation Council (GCC) agreement on extending cuts of other oil producers followed suit, he told reporters: "Exactly."
He was speaking at a summit of Gulf Arab leaders in Abu Dhabi which included key regional oil ministers from the Organisation of the Petroleum Exporting Countries.
The world oil crisis has dominated the GCC conference of OPEC members Saudi Arabia and its neighbours Kuwait, the United Arab Emirates and Qatar plus non-OPEC Oman and Bahrain.
Sheikh Saud said the Gulf Arab states would only be prepared to consider tighter curbs on output if there was full adherence with existing cuts from other producers.
"There is a very important factor here. We are watching the extent of the compliance of other OPEC members and non-OPEC members," said Sheikh Saud. "And if we witness full compliance with the cuts that we agreed upon in Vienna last March and last June, I think we are in a position to take further measures to improve the market."
Gulf officials have said the summit of six GCC leaders was expected to end on Wednesday only with a call to extend existing output cuts for six months until the end of next year as long as other producers did the same.
Two rounds of production cuts agreed this year by OPEC and non-OPEC members to remove just over three million barrels per day (bpd) from a glutted market have not improved prices.
The issue of compliance dogged a November OPEC meeting where Saudi Arabia refused to consider further supply curbs because rival producers were not meeting their earlier commitments to reduce output.
Kuwait was among OPEC members which pushed hard for more output cuts at the cartel's winter meeting in Vienna.
Asked why Gulf Arab states had not agreed to further cuts, Sheikh Saud said: "This is not an OPEC meeting. This is a summit meeting of the GCC countries and I think these (cuts) have to be made within the OPEC members -- providing that there is full compliance by other OPEC members for cuts they committed themselves to."
Saudi Crown Prince Abdullah on Monday had issued a strong appeal to Gulf Arab states in an unusually frank speech to take further action to save the oil market.
The heir to the Saudi throne in previous public statements has stressed the line that Riyadh wants to see full compliance from fellow oil producers with this year's package of output reductions before it considers more action.
World oil prices ended weaker on Tuesday after dealers took a pessimistic view of moves among OPEC producers to support a depressed oil market.
Benchmark Brent was valued at just $10.13 a barrel on Wednesday and on average this year is running lower than at any time since 1976.
12/09 10:27 NYMEX crude edges higher as Iraq blocks U.N. team
NEW YORK, Dec 9 - Crude oil futures on the New York Mercantile Exchange (NYMEX) edged higher early on news that Iraq had blocked a United Nations weapons team trying to carry out an inspection in Baghdad, traders said.
Traders said the market also found supportive news that Gulf Arab oil states would extend supply cuts until the end of next year and urging other producers to do the same to help stabilize oil prices.
"The market is a little optimistic that the Gulf Arab producers are making some attempt to support the market at this stage, but the larger story is Iraq," said a Maryland-based trader.
"We were earlier reluctantly pushing higher on technicals in the face of the bearish inventory report from the American Petroleum Institute, but the headlines on Iraq were bullish," he added.
12/09 11:27 FOCUS-Gulf Arabs agree to prolong oil output cuts
ABU DHABI, Dec 9 - Gulf Arab states agreed at a summit on Wednesday to prolong existing oil supply curbs and urged all producers to comply with the output limits to rescue collapsed prices.
A communique announcing the Gulf Cooperation Council's decision added that its six member countries were ready to enter into "suitable arrangements" with other producers to stabilise the market if they adhered to limits agreed earlier this year.
"The Council asserted the importance of oil producers to abide by production cuts they had pledged in June 1998 to stabilise the oil market. Based on this, the higher council agreed to extend work with production cuts pledged by its states until the end of 1999," the communique said.
"The higher council urges other producers to take similar moves to achieve stability in the market, the statement said of the meeting of the heads of GCC member countries.
Four GCC members, Saudi Arabia, the United Arab Emirates, Kuwait and Qatar, contributed almost half the 2.6 million barrels per day of production cuts that oil cartel OPEC agreed for the year to June 30, 1999.
The move by the GCC, which also includes non-OPEC Oman and Bahrain, was an improvement for oil traders on the failure of OPEC last week even to agree on an extension to the curbs.
But dealers, looking for signs of deeper supply cuts, kept crude prices near recent historic lows. Benchmark Brent traded in London at just $10.15 a barrel, $9 lower than on average last year.
Kuwaiti Oil Minister Sheikh Saud Nasser al-Sabah highlighted deep anxiety over the oil price crash, saying it justified holding an extraordinary OPEC meeting before the cartel's next scheduled session in March.
"The situation demands and justifies a meeting with regards to the oil price situation," he told reporters after the summit closed.
Sheikh Saud, a strong advocate of further production cuts, warned that oil prices could fall below $9 and said the GCC would not be willing to sacrifice its market share "for the sake of others."
"I could see it going below $9 if the winter is over and no measures are taken," he said when asked to forecast how far world Benchmark Brent could continue to fall.
Shortly after the agreement was announced, Iran said it was ready to take further measures with fellow OPEC countries to rescue the battered oil market.
"Iran is ready to take further necessary action together with other member countries for the acvhievement of market stability and a fair price for crude oil," said Ali Gharani, head of OPEC and energy affairs at Iran's oil ministry.
He said consultations on oil market conditions between OPEC members were in progress.
Rising tensions between old OPEC adversaries Saudi Arabia, Venezuela and Iran over market share had prevented agreement by OPEC even on extending existing cuts.
Any hopes that deeper cuts in the volume of output might emerge from the GCC summit foundered as key producers insisted that adherence to existing curbs must come first.
"If we witness full compliance with the cuts that we (have) agreed upon, I think we are in a position to take further measures," said the Kuwaiti oil minister.
In an unusually frank speech to Gulf Arab leaders, Saudi Arabia's Crown Prince Abdullah earlier issued a strong call for renewed efforts to arrest the price slide, which has pressured prices to the lowest on average for two decades.
At 1015 EST/1515 GMT, NYMEX January crude traded at $11.43 a barrel, up 13 cents, just below its early high of $11.46. The contract has dipped as low as $11.33. At 1022 EST/1522, front month crude eased a bit on profit taking and traded at $11.35, up five cents.
Refined products were mixed.
January heating oil was up 0.08 cent at 32.60 cents a gallon, helped by forecasts of colder but just seasonable weather ahead.
The early bounce appears to have overcome bearish builds in distillate stocks, which include heating oil and diesel, in the latest inventory reports.
The API said distillate stocks rose 2.5 million barrels to 151.1 million barrels last week, some 16.2 million barrels above their year-ago levels. The Department of Energy said the build was much smaller at 1.6 million barrels.
Gasoline futures were bearish. The January crude traded at 34.50 cents a gallon, down 0.21 cent, its early low. The contract has traded as high as 34.80 cents early.
The API data showed a gasoline stockbuild of 1.89 million barrels while the DOE said there was an increase of 2.5 million barrels.
"The API report confirmed that the current fundamentals are quite negative, but today's headlines on Iraq and the Gulf Arab states' summit recommendation on extending output cuts are reason for short covering," an oil trader said.
Chief U.N. weapons inspector Richard Butler said on Wednesday Iraq blocked a U.N. arms team trying to carry out an inspection in Baghdad and that this was "very serious,"
"Iraqi claims that this (inspection) was illegitimate are simply unacceptable, against the law -- that is, the resolutions of the Security Council," he told Reuters.
"So we were blocked and this very serious."
It was the first time a U.N. weapons had been prevented from entering a site since surprise inspections were resumed on Tuesday following Iraq's November 14 decision to drop its refusal to cooperate wiuth the U.N. Special Commission (UNSCOM) in charge of scrapping its weapons of mass destriction.
Iraq first limited cooperation on August 5 and then halted it completely on October 31, but switched signals as U.S. and British forces in the Gulf were poised to attack Iraqi targets.
12/09 10:51 World Oil prices edge up on extended Gulf output curb
LONDON, Dec 9 - Oil prices edged up from historic lows on Wednesday after Gulf Arab states pledged to extend measures already in place against a global supply glut.
International benchmark Brent crude was at $10.22 a barrel by 1530 GMT, up 11 cents.
The gains represented some reward for the Gulf Cooperation Council (GCC)'s agreement on Wednesday to prolong current oil supply curbs by six months to the end of next year.
"The higher council agreed to extend work with production cuts pledged by its states until the end of 1999," a communique said from the group which includes OPEC members Saudi Arabia, Kuwait, the UAE and Qatar as well as non-OPEC producers Oman and Bahrain.
Added price support came from a renewed flare-up between Iraq and U.N. weapons inspectors, helping to offset news of a big build in heating oil stocks in the key United States market. The GCC pledge signalled an improvement in producer harmony after oil cartel OPEC's failure late last month to extend its 2.6 million barrel per day (bpd) cut package sent prices spinning into single digits.
Any hopes that fresh output cuts might emerge from the summit foundered as key producers insisted that adherence to existing curbs must come first.
"If we witness full compliance with the cuts that we (have) agreed upon, I think we are in a position to take further measures," said Kuwaiti oil minister Sheikh Saud Nasser al-Sabah.
Sheikh Saud, a strong advocate of deeper output cuts, added that the price crash justified holding an extraordinary OPEC meeting before the cartel's next scheduled session in March.
But he made it clear that Gulf Arab states would not act independently of OPEC. "We're not willing to sacrifice our market share for the sake of others," he said.
Rising tensions between old OPEC adversaries Saudi Arabia, Venezuela and Iran over market share had prevented the group agreeing even a simple cut extension last month.
Yet Saudi Arabia's Crown Prince Abdullah earlier this week called for renewed efforts to arrest the price slide. And Iran on Wednesday said it was ready to take further measures with other OPEC countries.
"Iran is ready to take further necessary action together with other member countries for the achievement of market stability and a fair price for crude oil," said Ali Gharani, head of OPEC and energy affairs at Iran's oil ministry.
Sellers sentiment got a further boost after U.N. arms inspectors were prevented from carrying out what Iraq called a "provocative" inspection of a headquarters of President Saddam Hussein's ruling Ba'ath Party.
"If UNSCOM cannot do its job effectively, we remain poised to act," said White House spokesman David Leavy. Richard Butler, head of the U.N. Special Commission on weapons inspections called Iraq's decision "very serious."
Yet the scale of producers' price problems was underlined by a sharp build in U.S. heating oil supplies, spurred by unusually warm December temperatures across much of the U.S. east coast.
The American Petroleum Institute (API), a key indicator of trends in the world's biggest oil market, said heating oil stocks rose 2.8 million barrels last week, pushing total distillate inventories 16 million barrels above last year.
Producers had been hoping for a long, cold northern hemisphere winter to ease a giant stock surplus that has stifled any budding price rebound.
12/09 11:06 U.S. cash crude drifts lower with benchmark WTI
NEW YORK, Dec 9 - U.S. cash crude prices drifted early Wednesday as traders found little inspiration in either the latest stock data or an agreement by Gulf Arab states to extend production cuts.
The U.S. cash crude benchmark, West Texas Intermediate, dipped to under $11.30 a barrel early in the session. Its course was largely set by the January futures contract, which was trading six cents lower at $11.24 a barrel at 1055 EST/1555 GMT.
The spread between the January and February markets was said to be trading at about 40 cents a barrel.
Meanwhile, differentials for individual grades were unable to break from fairly narrow ranges.
Light Louisiana Sweet/St. James, which over the last few days has found support from indications that the arbitrage to bring competing crude over from Europe has closed, was assessed between eight and five cents under the benchmark.
Its sister grade, Heavy Louisiana Sweet/Empire, was placed between minus 20 and 15 cents a barrel after changing hands at discounts of 17 and 15 cents on Tuesday.
West Texas Sour/Midland was discussed between minus $1.35 and $1.28 a barrel, while West Texas Intermediate/Midland was camped between 35 and 30 cents under WTI/Cushing. U.S. cash crude traders appeared to shrug off American Petroleum Institute figures released Tuesday which showed a 2.8 million barrel decline in crude stocks. Both traders and analysts said whatever strength the stockdraw would normally lend the market was tempered by a sharp rise in crude imports and heating oil supplies.
Crude traders also seemed unimpressed by an announcement from the Gulf Arab states early Wednesday that they agreed to extend production cuts until the end of next year.
The agreement came in the wake of OPEC's failure late last month to take any measure to arrest the long fall in world oil prices, and complaints that the oil cartel is producing well above promised levels.
"You've got to have compliance before getting too excited about an extension," one cash crude trader said of the agreement by the Gulf Arab states.
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