MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING MONDAY, FEBRUARY 2, 1998 (2)
Iraq News Softens Asia Oil, IOC Prices Disclosed
Crude oil prices fell further in Asia early on Monday, with the prospect of additional Iraqi oil in world markets weighing on the minds of futures traders and depressing broker assessments of North Sea Brent, traders said.
Brokers pegged March Brent at $15.76/15.86, down about 67 cents a barrel from Friday levels.
The move was a result of overnight and late Friday futures losses in Western markets.
But Abu Dhabi differentials in Asia were expected to firm slightly following news that the Indian Oil Corp Ltd (IOC.BO) had taken three Dubai cargoes in its monthly tender, traders said.
Traders said three cargoes of Dubai had been awarded to Caltex (CTX.AX), Mobil (MOB) and Total SA (NYSE:TOT - TOTF.PA).
A 500,000 barrel Dubai was reported sold to Caltex at a price of March first half minus 32 cents a barrel, traders said.
A similar volume was awarded to both Total and Mobil at March second half minus 48 cents and March second half minus 60 cents per barrel.
Traders said three very large crude carriers (VLCC) of Nigerian Qua Iboe were also awarded in the IOC tender at a price of dated Brent plus 80 cents on a delivered basis.
The drop in cash Brent followed news that U.N. Secretary-General Kofi Annan proposed on Sunday that Iraq should be allowed to sell a total of $5.2 billion of oil over the next six months to buy food, medicine and other goods.
The so-called ''oil for food'' programme, an exception to stringent sanctions imposed on Baghdad, currently allows Iraq to sell oil worth $2 billion every six months.
The new proposal, which adds $3.2 billion in extra oil sales, sparked concern among traders about new oil supplies in an already soggy global market.
NYMEX
CRUDE OIL
Crude-oil futures prices settled lower Monday after fluctuating through the day on indications tensions may be easing between Iraq and the United States.
March light sweet crude oil settled down $0.16 to $17.05.
Iraq-U.S. tensions over U.N. weapons inspections appeared to ease early in the day, as Iraqi officials said the nation will pursue all means to avert a threatened U.S. military strike.
One early report said Iraqi President Saddam Hussein might allow weapons inspectors into as many as eight of his presidential palaces. He had previously called the palaces off-limits. The news took prices lower.
But at midafternoon, Iraqi Deputy Foreign Minister Riyad al-Qaysi said the report about the palaces was wrong. He also denied a report that Saddam Hussein was prepared to meet with chief U.N. weapons inspector Richard Butler.
This news raised prices again and renewed the tension -- and uncertainty -- over whether the U.S. might attack Iraq. The U.S. has said time is running out for diplomatic approaches to get Iraq to comply with weapons inspectors.
The inspectors are charged with ensuring that Iraq no longer possesses or produces weapons of mass destruction, a condition of the cease-fire that ended the 1990 Persian Gulf War.
"I don't think anyone knows for sure if, when, how the bombing will occur," said energy analyst Bill O'Grady of A.G. Edwards. "It doesn't look like [Iraq] is going to back down."
Crude-oil prices were also hurt by a report that U.N. Secretary General Kofi Annan has recommended increasing Iraq's limited oil sale to $5.2 billion every six months, from around $2 billion at present. Iraq is allowed to sell a limited amount of crude to raise money, mostly for humanitarian aid.
O'Grady called the proposed sales increase "pretty massive." He said: "From a pricing perspective, this is deadly."
NATURAL GAS
Natural gas futures ended higher across the board Monday in a fairly active session, driven all day by follow-through technical buying and short covering after Friday's break of chart resistance.
March climbed 7.2 cents to close at $2.329 per million British thermal units. April settled 6.5 cents higher at $2.348. Other months ended up by 0.9 to 5.8 cents.
"Considering the weather, I think it's (the rally) too much, but all the techies are bullish now," said one East Coast trader, noting cash firmed today but followed the screen.
Chart traders agreed March's break Friday of some key resistance points and today's follow through to the upside likely sets the stage for more gains near-term.
But many remained concerned about the growing stock surplus to year-ago and the lack of Arctic weather to stir better demand.
Forecasts this week still call for mostly above-normal U.S. temperatures though more seasonal levels are expected for the Northeast and Mid-Atlantic by the weekend.
Technically, traders pegged March resistance at today's high of $2.38, with more selling expected in the $2.50 area and then at the prominent highs in the low-$2.70s. Failed resistance at $2.18 represents first
support, with more buying likely at $2.03. A close below the recent $1.96 spot low could set up a test of daily continuation chart support in the $1.85 area though there could be some buying ahead of the March contract low of $1.93 from April, 1996.
In the cash Monday, Gulf Coast swing quotes firmed 10 cents or more to the $2.15-2.20 area. Midcon pipes jumped 15 cents to the $2.10-2.15 range. New York city gate gas was quoted a nickel higher in the low to mid $2.40s, while Chicago was up 10 cents to the mid-$2.20s.
The NYMEX 12-month Henry Hub strip gained 9.6 cents to $2.438. NYMEX said an estimated 84,175 Hub contracts traded, up sharply from Friday's revised tally of 55,458.
OIL & GAS PRICE REFERENCES
Charts: oilworld.com
NYMEX Reference quotewatch.com
NORTH AMERICAN RIG COUNT
Canada Rig Count Down Three to 509 Versus 414 A Year Ago
The number of rigs exploring for oil and natural gas in the United States stood at 987 as of January 30, down nine from the previous week, and 180 above the year-ago total of 807, Baker Hughes Inc [NYSE:BHI] reported.
The number of rigs drilling on land fell by 11 to 828, while rigs working offshore rose by two 134. The number of rigs active in inland waters remained at 25.
Among the individual states, the biggest changes occurred in Texas, up by nine, in Oklahoma down by nine, and in New Mexico down by five.
The Gulf of Mexico rig count rose by two to 133.
The number of rigs searching for gas fell by two to 593, the number of rigs searching for oil rose by seven to 389, while the number of miscellaneous drilling projects remained at five.
There were 244 rigs drilling directionally, 68 drilling horizontally and 675 drilling vertically.
In Canada, the number of working rigs fell by three to 509 versus 414 one year ago.
The weekly rig count reflects the number of rigs exploring for oil and gas, not those producing oil and gas.
For additional data, go here; bakerhughes.com
Global oil values are increasing and hard hit off fresh market fundamentals. Recent down trends in petroleum markets are being "corrected" as current figures display substantial growth from earlier this year. Go here for more detail. discoveryplace.com
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