MARKET WRAP -1 / Crude Oil & Natural Gas Current Scenario-News
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12/14 09:47 Low oil prices will cut 1 mil bpd U.S., Canadian oil from market
12/14 16:00 World oil advances on producer talks, Venezuela
12/14 16:05 US Crude Outlook- Madrid meet reverses price dip
12/14 17:23 NYMEX crude, products settle up on Madrid hopes
12/24 16:51 U.S. cash crude rides the surge of futures market
12/14 17:34 U.S. foreign crude market saturated, sluggish
12/14 17:42 U.S. Cash Prods-mogas up on Midco refiner buying
12/14 09:47 Low oil prices will cut 1 mil bpd U.S., Canadian oil from market
CARACAS, Dec 14 - Luis Guisti, president of Venezuelan state oil company, Petroleos de Venezuela (PDVSA), said Monday that continued low crude oil prices would drive about one million barrels per day of U.S. and Canadian oil production out of the market in the next few months.
"The producers which are experiencing difficulties are Canada, Louisiana offshore and stripper wells in the United States," he told reporters.
12/14 16:00 World oil advances on producer talks, Venezuela
LONDON, Dec 14 - Glutted oil markets gained ground on Monday after Venezuela said it was considering fresh supply cuts and Saudi Arabia called again for action to support prices.
Benchmark Brent tip-toed into double figures to end 34 cents firmer at $10.16 a barrel, half a dollar above a fresh 12-year low struck on Thursday.
The market rose early on news that oil ministers of big producers Saudi Arabia, Venezuela and Mexico would meet on Thursday in Madrid to talk about ways of rescuing prices wallowing at 12-year lows.
That news raised prospects for another round of production restraint to sweep prices up from a 12-year floor.
A Gulf source familiar with Saudi thinking said that fresh volume cuts and extensions of existing reductions would both be up for discussion.
Prices rose again after state Petroleos de Venezuela head Luis Guisti said his government was considering fresh output cuts, but he expected prices to stay low in the medium term.
More support came from a statement by Saudi Arabian King Fahd supporting a recent call by Crown Prince Abdullah for action by OPEC and non-OPEC states to shore up markets.
But analysts were not convinced that the Madrid meeting would produce fresh cuts despite its similarity to previous gatherings of the trio this year that sealed volume sacrifices.
Analysts cautioned a sharp rally remained highly unlikely in view of a stubborn overhang of stocks and simmering differences within OPEC about compliance with existing pledged cuts.
''I can't see anything having an impact on the price. Remember that we've got all-time high inventories compounded by falling demand,'' said Mark Redway of London's T. Hoare & Co.
Producers have found it difficult to get full compliance with cuts of 3.1 million barrels per day (bpd) orchestrated by the trio in talks in Riyadh in March and Amsterdam in June.
The bulk of the volume cuts have come from 2.6 million bpd in reductions agreed by 10 of the 11 members of the Organisation of the Petroleum Exporting Countries. Sanctions-bound Iraq plays no part in the cuts.
One of several sticking points has been Iran, which insists its 305,000 bpd of pledged cuts should be made from a baseline of 3.9 million bpd rather than the 3.6 million bpd it agreed at an OPEC meeting earlier in the year.
And Venezuela in November was pumping some 305,000 bpd above its allocation, although president-elect Hugo Chavez reiterated over the weekend his government would respect its output quota.
Renewed Venezuelan discipline could hasten a resolution of wider issues that eluded OPEC at a meeting last month, OPEC watchers say. That gathering ended without even an agreement to extend the existing cuts by six months to the end of 1999.
OPEC President Youcef Yousfi said at the weekend that OPEC members were discussing the possibility of an emergency meeting before March.
''I don't think (the Madrid talks) will be about more cutbacks, but more importantly what the (Venezuelan) President-elect said yesterday about continuing with the commitment,'' Mexican Energy Ministry spokesman Octavio Mayen said on Sunday.
''The point of the meeting is to revise oil strategy, revise the agreements made over the cutbacks, ratify respect for the cutbacks and evaluate (them),'' he said.
12/14 16:05 US Crude Outlook- Madrid meet reverses price dip
NEW YORK, Dec 14 - U.S. crude oil markets will likely spend the next few days on a roller coaster as traders look toward as meeting between three of the world's leading oil producers in Spain.
Saudi Arabia, Venezuela, and Mexico plan to meet Thursday in Madrid to discuss ways to resurrect a market which saw prices fall to fresh 12-year lows last week.
Hopes that the three oil powers will orchestrate another round of production cuts lifted the market out of the basement Monday, pulling crude futures 50 cents higher to $11.29 a barrel.
"It is far from certain that this meeting will have concrete results for oil prices, but it's more of a hope than the bulls had to cling to at the end of last week," one trader said.
"Third-party assessments of OPEC production show that they are not living up to their commitments," Richard Redash, senior energy analyst at Prudential Securities, said. "They expect the market to think they are going to do more when they haven't met earlier promises... that adds more skepticism on what they will do next."
But even if the three countries can agree to further cuts, traders and analysts have warned that the market still must contend with a massive stock surplus.
In the U.S., crude stocks of 335 million barrels are some 20 million barrels above year-ago levels, and imports are running near record highs, according to the latest American Petroleum Institute figures.
Crude traders will be watching this week's API figures closely for signs that a several days of colder weather have jump-started oil demand, boosting crude runs at refineries and cutting into inventories.
So far there has been little indication that U.S. refiners have been scouring the market for additional crude, leaving domestic crude differentials camped in a narrow-range over the past week.
Light Louisiana Sweet/St. James, for instance, has been trading at about five cents below benchmark West Texas Intermediate/Cushing. West Texas Sour/Midland, another key grade, has been set at about $1.35 a barrel beneath WTI/Cushing. Few traders saw any significant change in differentials over the coming days.
Imported crude prices are also expected to be fairly steady over the coming days, though sweet grades could come under some downward pressure.
While the arbitrage to move incremental cargoes North Sea Brent into the U.S. Gulf Coast has become unprofitable, there is no shortage of light, sweet crude to choose from, traders said.
Colombia's Cusiana and West African crudes such as Nigerian Bonny Light are said to be widely available in the market. Details are scarce on the latest Cusiana tender, but there is speculation that the four cargoes were awarded at about $1.45 under WTI/Cushing, or 10-20 cents weaker than the previous tender.
Crude traders said Bonny Light remains on offer at February WTI / Cushing less 50 cents, compared to a 40 cent discount earlier this month.
Otherwise, crude traders said they would be looking for details to emerge this week from a number of recent sell tenders, including one for a Colombian Cano Limon cargo scheduled to load in early January. They will also be watching for results of Chile's tender to buy a million barrels of crude for delivery in mid January.
12/14 17:23 NYMEX crude, products settle up on Madrid hopes
NEW YORK, Dec 14 - Hopes that major producers Saudi Arabia, Venezuela and Mexico would hold talks this week to find a cure to sickly oil prices pushed up crude and products futures on the New York Mercantile Exchange on Monday, traders said.
At 1510 EST/2010 GMT, NYMEX January crude traded at $11.27, up 48 cents, before last trading at $11.25. It settled at $11.29, up 50 cents. The contract's session high was $11.34.
January heating oil held hefty gains and near the close traded at 32.75 cents a gallon, up 1.25 cents. It last traded at 32.65 cents and settled at 32.71 cents, up 1.21 cents.
January gasoline was up 1.06 cents at 35.50 cents a gallon and last traded at 35.35 cents before settling at 35.49 cents, up 1.15 cents. The contract traded between 34.50/35.80 cents.
At 1510 EST/2010 GMT, January Brent crude on the International London Exchange traded at $10.10 a barrel, up 28 cents and shortly thereafter moved up to settle at $10.16.
On Monday, the market's bullish mood was enhanced by two other developments -- news that Venezuela was considering making fresh oil production cuts to raise prices in 1999 and news that Saudi Arabia's King Fahd was backing a recent call by Crown Prince Abdullah for joint efforts of OPEC and non-OPEC producers to shore up oil markets further supported the market's advance.
But the key catalyst for Monday's crude rally was news that key representatives of Saudi Arabia, Venezuela and Mexico would meet in Madrid this week. The three countries, which orchestrated producers' agremeents this year to withdraw 3.1 million barrels per day (bpd) of oil from global markets, would consider all options, including output cuts and extensions of existing cuts, at this week's meeting, according to a Gulf source familiar with Saudi thinking.
The three plan to meet in Madrid on Thursday. Mexico's Energy Minister Luis Tellez was expected to arrive on Wednesday in the Spanish capital to join in the oil talks, according to a Mexican embassy spokesman in Madrid.
The meeting comes after the Organization of Petroleum Exporting Countries (OPEC) failed to make any decision to stem sliding oil prices at its winter meeting in Vienna on Nov. 25. That led to the fall of oil prices on both sides of the Atlantic to plunge to their current 12-year lows.
The news of the producers' meeting ahead of OPEC's March summit created mixed feelings among oil traders with some saying it would support the market if the trio came up with a clear plan to lift prices. Analysts in recent weeks have said that a cut from 1.0-1.5 million barrels per day (bpd) may be needed to bolster current prices.
Others were skeptical, noting that OPEC members still have to comply fully with their output-cut commitments.
"Third-party assessments of OPEC production show that they are not living up to their commitments," said Richard Redash, senior energy analyst at Prudential Securities.
"They expect the market to think they are going to do more when they haven't met earlier promises...that adds more skepticism on what they will do next," he added.
"A lead role for Saudi Arabia is right now the only thing that will help overcome skepticism that the market has," he added, but noted that any related rally is currently seen as a selling opportunity..
Over the weekend, concerns over revenue shortfalls amid the depressed market were once again raised at a meeting of the Organization of Arab Petroleum Exporting Countries, which include big Arab oil producers plus Egypt and Syria.
Late last week, Algeria blasted some OPEC producers for their "selfishness," which it said had caused the current depressed oil prices. While no countries were mentioned, other producers previously named Venezuela and Iran as primary overproducers.
On Monday, a market survey of OPEC production by the trade newsletter Middle East Economic Survey (MEES) showed that the group lifted its production by 710,000 bpd in November, a serious setback to the group's efforts to rein in supplies.
The newsletter said OPEC raised its production to 27.56 million bpd in November, up from 26.85 million bpd in October, indicating compliance at 73 percent.
12/14 16:51 U.S. cash crude rides the surge of futures market
NEW YORK, Dec 14 - Cash crude oil prices in the United States were up across the board Monday as traders pinned hopes that a Madrid session of influential world oil producers will lead to production cutbacks.
A Saudi Arabian call for action to lift prices and a Venezuelan statement supporting production cuts were also seen as bullish news for the futures market and therefore the basis of cash crude prices -- West Texas Intermediate/Cushing.
On Thursday, oil ministers from Saudi Arabia, Mexico and Venezuela meet in the Spanish capital to discuss ways to raise crude oil prices.
These three inter-related news stories lifted January's crude oil contracts on the New York Mercantile Exchange by 50 cents to $11.29 per barrel on Monday. The February crude oil contract was up 42 cents to $11.73 a barrel.
This brought the January/February roll down to minus 44 cents. This in turn rose the value of West Texas Intermediate/Cushing postings plus to $2.10/$2.12 per barrel. Postings plus was done at $2.10 on Monday.
Monday was relatively active in trading for domestic cash crude traders, many of whom returned to their offices after spending the end of last week at industry functions in New Orleans. While outright prices for all crude oil grades rose on Monday because of the half-dollar rise in the near-month futures market, differentials for Midland grades were up about four cents and differentials for Louisiana grades were unchanged.
A large amount of West Texas Intermediate/Midland was done at 30 cents under WTI/Cushing and a small amount at -29 cents to WTI/Cushing. This was a strengthening of differentials to WTI/Cushing by about four cents.
West Texas Sour/Midland was also four cents stronger in terms of differentials on Monday. WTS/Midland was done at -$1.35 and also -$1.34 per barrel.
Heavy Louisiana Sweet/Empire was pegged at -20/-15 cents and done at -20 cents. Light Louisiana Sweet/St. James was done at least two times at -6 cents and pegged at -6/-4 cents. Eugene Island at -$1.15/-1.05; and Bonito Sour at -90/-75 cents.
The exchange-for-physical premium to guarantee domestic delivery into Cushing, Oklahoma against the NYMEX was done at 4.5 cents.
And the January/February roll was done at minus 48 cents on Monday morning before narrowing in the afternoon.
12/14 17:34 U.S. foreign crude market saturated, sluggish
NEW YORK, Dec 14 - The U.S. market for imported crude slowed to a near standstill Monday as traders looked ahead to a meeting between three top producers later this week in Madrid.
News that Saudi Arabia, Mexico, and Venezuela plan to meet Thursday in Spain helped lift crude prices out of the basement, pulling futures 50 cents higher to $11.29 a barrel on the New York Mercantile Exchange (NYMEX).
But in the spot market, crude traders took a cautious view of the meeting.
"The market is pretty flooded," one physical trader said, adding it will "take more than talk" to turn prices around.
Even with the arbitrage to bring incremental North Sea Brent cargoes into the U.S. Gulf Coast closed, there is no shortage of West African or Latin American crude to choose from, traders said.
NORTH SEA, WEST AFRICAN
-- The January West Texas Intermediate-North Sea Brent arbitrage widened slightly on Monday, closing at $1.13 a barrel. Traders said this was still too narrow to encourage additional trans-Atlantic sales, however, which kept discussion of European crude to a minimum.
-- But West African grades remained well-supplied, despite recent interruption at the Forcados terminal in Nigeria.
Shell said Monday that loading had resumed at Forcados terminal, but declared force majeure to cover days lost to the shutdown.
Shell pumps a little under half of the more than two million barrels per day of production from Nigeria, some 400,000 bpd of which is exported through Forcados.
-- Meanwhile, Nigerian Bonny Light was on offer at February WTI minus 50 cents, about 10 cents weaker than last week, while Qua Iboe was camped around the same level.
LATAM - COLOMBIA, VENEZUELA, ECUADOR, CHILE
-- Crude traders speculated that four Cusiana cargoes tendered last week were awarded around $1.40 a barrel under West Texas Intermediate. A trader was said to be re-offering one of the cargoes at a discount of about $1.35, which is still about 10 to 15 cents weaker than Colombia's sweet crude was being discussed earlier this month.
-- The market is still awaiting details of last week's tender for medium-heavy Vasconia, due to load January 9-13. A January 4-8 loading cargo of Vasconia was recently awarded around $2.87 under WTI, according to traders.
-- Colombia's medium-heavy Cano Limon was assessed only slightly stronger than that, with traders putting it between $2.80 and $2.45 under WTI. Traders said that competition from other foreign grades, notably Iraqi Basrah Light, was one of the reasons that Cano Limon was under pressure.
IRAQI
-- Iraqi sour crude, Basrah Light was said to be on offer at around $2.50 under WTI on a delivered basis, traders said.
12/14 17:42 U.S. Cash Prods-mogas up on Midco refiner buying
NEW YORK, Dec 14 - Gasoline cash differentials in New York Harbor and the Midcontinent ended a shade firmer despite the hikes on the NYMEX amid talk of a Midwest refiner unusually buying Northeast supplies, traders said.
"It is surprisingly stronger today," a Harbor trader said. "There was the phenomenon of a Midco buyer which drove the market 0.50 cent higher."
But other traders had not heard of the deal.
Jet fuel in the Harbor on the 54-grade also saw the biggest losses, shedding up to 0.75 cent and losing its premium to trade at par the January NYMEX.
The rest of the gasoline and distillates were steady to a quarter cent lower amid a lack of buyers and scheduling in the Gulf.
"Its been pretty dead...there were not a whole lot of bids," a distillate trader said.
Late in the day, news broke out on the cash market that there was a fire at Tosco Corp.'s 150,000 barrels per day (bpd) refinery at Trainer, Pa.
But a company spokesman said operations were not affected after it extinguished a fire at a welding truck on Monday.
On the NYMEX, refined oil product futures settles around 1.20 cent per gallon firmer as players remained bullish over a meeting Thursday's Madrid meeting of Saudi Arabia, Venezuela and Mexico.
January heating oil held hefty gains to settle at 32.71 cents a gallon, up 1.21 cents while gasoline was up 1.15 cents at 35.49 cents.
January crude settled at $11.29 per barrel, up 50 cents.
NEW YORK HARBOR
Conventional gasoline differentials ended around a quarter firmer amid some talk of a Midco refiner buying prompt supplies.
Some trade was reportedly done at 3.75 cents below the NYMEX but other traders had not heard of the buyer. Prompt supplies of M5 were pegged at 4.50/4.25 cents discount with a10,000 barrels heard traded at 4.00 cents.
The only other deals traders had heard on the thinly talked market was for regular reformulated A5-grade at 2.25-2.00 cents discount, and A9 at 1.25 cents.
Trade was similarly dull on the distillate with differentials rangebound except for the jet fuel which lost up to 0.75 cent to trade at par to the heating oil NYMEX.
Prompt heating oil differentials traded within range at a1.00 cent discount to the NYMEX while low sulphur diesel was pegged a quarter to half cent lower at 0.25/0.50 cent over the screen.
MIDCONTINENT
Group Three gasoline firmed a bit in thin trade, but the dominant theme was that ranges between buy and sell widened in the Midcontinent as trade was all but wiped out as players watched the futures screen.
Group regular gasoline was pegged about 0.25 cent stronger at 4.00/3.75 cents discount.
Chicago gasoline was pegged about 4.00/3.75 cent under the print while low sulphur diesel differentials were under and over 0.25 cent to the screen.
Gasoline in the Group was pegged up to 4.25/4.00 cents discount, premium was pegged at a 2.65 cents regrade and low sulphur diesel at flat to the screen.
GULF COAST
Distillates differentials sank slightly in thin trade, as buyers stepped away from the feverish futures, while gasoline products were steady, traders said.
Heating oil sank about 0.35 cent in thin trade to 3.45/3.15 cents under the screen, but trade was non-existent.
Jet fuel 54-grade also softened about 0.10 points to 2.00/1.60 under the screen and traded at 2.00 cents under.
Low sulphur diesel, which schedules later in the day, was pegged 0.25 cent weaker on the day, assessed at 2.00/1.75 cents discount.
Gasoline M4 traded on the sell side of its range at 5.00 cents under the screen.
Regular reformulated gasoline was pegged 10 points weaker at 2.75/2.50 under the screen. Premium conventional V-grade gasoline held gains since refiners have stopped producing the grade amid bad economics, its regrade over the M-grade has nearly doubled to 3.00/3.25 cents.
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