MARKET ACITIVITY/TRADING NOTES FOR DAY ENDING WEDNESDAY, APRIL 1, 1998 (1)
Bay Street Again Weak
Dow Rises For Second Day
Continuing weakness in commodities worked against Bay Street. Falling interest rates and stellar performances from some of the world's largest companies sent Wall Street higher.
The Toronto Stock Exchange 300 index didn't fare as well as the Dow because of its higher exposure to commodity prices, said Subodh Kumar, portfolio strategist at CIBC Wood Gundy Securities Inc.
Toronto's gold and precious metals subindex dropped nearly 1%, leading decliners, as the gold price on the Comex division of the New York Mercantile Exchange fell US$1 to US$299.50 an ounce.
The TSE 300 fell 30.64 points, or 0.4%, to 7527.86.
On the TSE, about 117.6 million shares were traded, down from about 118.1 million shares Tuesday.
Computer-related and telecommunications companies fell, including Northern Telecom Ltd. (ntl/tse), down 75› to $91, CAE Inc. (cae/tse), down 15› to $11.20, and Cognos Inc. (csn/tse), down $1.10 to $38.90. BCE Inc. (bce/tse) slipped 85› to $58.65 to pace the decline.
"I think there will be some disappointments as first-quarter earnings come through," said John Kinsey, a portfolio manager with Caldwell Securities Ltd.
Base metal producers also dragged down the market on concern that the full effects of currency problems and the slowdown in Asian economies are yet to be felt.
Falconbridge Ltd. (fl/tse) fell 10› to $20.40 on expectations that world copper prices, down 35% since June, will decline further.
The financial services subindex accounted for 9.4 points of the TSE 300's decline. Canadian Imperial Bank of Commerce (cm/tse) fell 70› to $48.80, Mackenzie Financial Corp. (mkf/tse) fell 20› to $19.80 and Bank of Montreal (bmo/tse) fell 55› to $75.95. Newcourt Credit Group Inc. (nct/tse) fell $1.55 to $69.45.
Barrick Gold Corp. (abx/tse) dropped 50› to $30.20 and Placer Dome Inc. (pdg/tse) slipped 35› to $18.25.
Other Canadian markets closed mixed on the day. The Montreal Exchange portfolio fell 24.78 points, or 0.7%, to close at 3811.36. The Vancouver Stock Exchange rose 3.59 points, or 0.6%, to close at 630.54.
The Dow Jones industrial average gained 68.51 points, or 0.8%, to close at 8868.32 after rising more than 11% in the first three months of the year.
The Standard & Poor's 500 index rose 6.4 points, or 0.6%, to a record close of 1108.15.
The Nasdaq composite index gained 11.98 points, or 0.7%, to close at 1847.66, also a record.
About 678 million shares changed hands on the Big Board, up from about 667.1 million shares traded Tuesday.
"Gains in the first quarter were better than many people had expected for the entire year," said Robert Finch, a mutual fund manager at Aeltus Investment Management in Hartford. "That's because more money went into mutual funds than anyone expected, and it continues to flow."
Some of the world's largest companies rose. Coca-Cola Co. (ko/nyse) gained US$3 3/16 to US$80 5/8 after the chairman of the world's No. 1 beverage company said it would boost investment in Asia.
Major international markets also were mixed yesterday.
London: The FT-SE 100 index closed above the 6000 mark for the first time, lifted by a wave of new money at the start of the second quarter. The FT-SE 100 closed at 6017.6, up 85.4 points, or 1.4%.
Frankfurt: Germany's Dax index hit a record high but pared gains in afternoon trade. The Dax closed up 51.86 points, or 1%, to 5154.21.
Tokyo: Stocks ended weaker, erasing gains earned Tuesday and reflecting the weakness of the Japanese economy, brokers said. The 225-share Nikkei average closed down 285.51 points, or 1.7%, to 16,241.66.
Hong Kong: Stocks closed sharply lower as end-of-quarter buyers dropped out of the market. The Hang Seng index closed down 187.26 points, or 1.6%, to 11,331.42.
Sydney: Shares slid from their early highs but ended in positive territory. The all ordinaries index rose 8.7 points, or 0.3%, to close at 2752.9.
OIL & GAS
Oil Prices Drop As OPEC Pact Under Scrutiny
LONDON, April 1 - World oil prices fell below $14 a barrel on Wednesday as traders took another look at an OPEC deal to cut production amid doubts that it will be enough to soak up the world crude glut.
Traders marked values more than a dollar lower on Monday and Tuesday even as the cartel of the world's leading oil producers met in Vienna to agree a landmark production restraint accord to support sagging oil prices.
Benchmark Brent blend held steady for much of the afternoon around $14.10 but prices dropped sharply in late trade on a bout of selling by speculators. Brent closed 31 cents lower at $13.95 a barrel.
Traders said the drop was caused by speculators ditching 1,000 lots of crude futures in the last few minutes of business.
''There's no fresh news. The general picture is of a quiet market which still looks weak,'' said one dealer.
An emergency Organisation of Petroleum Exporting Countries meeting that ended in the early hours of Tuesday approved a 1.245 million barrels per day (bpd) cartel contribution to a two percent cut in global output.
Other cuts will come from non-OPEC Norway, Mexico, Egypt, Oman and Yemen, which have pledged to trim 270,000 bpd for a total of 1.5 million bpd in overall promised reductions.
The object was to rescue oil from a calamitous 40 percent price slide that took Brent down to a nine-year low of $11.90 a barrel.
The cuts achieved their goal in the days after they were agreed at a meeting 12 days ago in Riyadh between Saudi Arabia, Venezuela and Mexico, boosting levels by some $3.
But scepticism that 1.5 million bpd worth of cuts would be sufficient to stabilise a market drowning in unwanted oil and doubt over future OPEC member committment to restraint took the shine off the accord
''The 1.5 million bpd is very much a minimum, but it will limit how far prices can fall and that was OPEC's goal when the deal was first touted,'' said Leslie Nicholas of brokers GNI in his daily report.
Venezuelan Oil Minister Erwin Arrieta, one of the architects of the Riyadh pact, said in London on Wednesday that he still hoped for a cut of 1.5 million bpd from OPEC members.
He told reporters that he expected non-OPEC's contribution to rise to 500,000 bpd for a total cut of 2.0 million bpd. He added that he hoped Russia and Malaysia would join other non-OPEC members to curb output.
But the London oil futures market barely reacted to the news with May Brent gaining only two cents after Arietta spoke.
After their meeting OPEC ministers pleaded for patience, arguing that prices would rise once production restraint bit into crude shipping schedules.
''The market should judge the OPEC decision in two months,'' said Saudi Arabian oil minister Ali al-Naimi, arguing that a new spirit of pragmatism prevailed within the cartel, which pumps 40 percent of global oil supplies.
Warm winter weather, growing Iraqi oil exports and a mistimed OPEC move in November to hike output by 10 percent were responsible for the slide from last year's average Brent price of $19.32 a barrel.
Only OPEC production levels have now changed, analysts point out, and extra U.N.-mandated Iraqi oil sales pencilled in for this year should also limit the upside to prices.
NYMEX Crude Oil Steadies On No News
Crude-oil and petroleum-product futures settled lower Wednesday on the New York Mercantile Exchange for the fourth straight day, as the prospect of output cuts still failed to attract buying interest.
The general lack of buying stands as testament to a growing belief in the market that the 1.5 million barrels a day of production cuts from OPEC and non-OPEC suppliers ratified at the Organization of Petroleum Exporting Countries' extraordinary meeting in Vienna Monday won't be enough to stop the decline in oil prices.
Many had thought the cuts would establish a floor above the nine year low of $12.80 hit March 17, but more analysts are questioning that thinking. "There are a lot of people who see crude oil hitting new lows," said Tom Bentz, an energy analyst with Cresvale International. "Even if the cuts materialize, there will still be an overhang of around 1 million barrels a day."
There is little chance that an unexpected event on the demand side will develop and soak up those extra barrels, analysts said. The peak demand season for heating oil has ended, and the peak-demand summer season for gasoline isn't expected until the latter part of the second quarter. Slower demand growth in Asia also is expected to further damp demand.
Bearish crude oil inventory statistics this week added to the bearish tone. The American Petroleum Institute, in a report Tuesday, showed that U.S. crude oil stocks climbed 2.203 million barrels in the week ended Mar. 27 to 328.949 million barrels, their highest level in more than two years. The U.S. Department of Energy issued data Wednesday that showed a 1.6 million barrel rise in stocks. U.S. gasoline stocks rose 826,000 barrels in the API report, but dropped 500,000 barrels in the DOE report. Distillate stocks, which include heating oil, dropped 828,000 barrels, according to the DOE, and 2.4 million barrels, according to the API.
US Cash Crudes - Oversupply Old News; Diffs Steady
NEW YORK, April 1 - U.S. spot crude oil differentials on Wednesday were largely unchanged as traders said a vast supply of sour crudes remained in the market.
But West Texas Sour on Tuesday lost 15 cents on a differential basis compared with the benchmark West Texas Intermediate/Cushing, allowing WTS to remain steady on Wednesday.
Differentials to the WTI/Cushing for most cash crudes were unchanged on Wednesday.
Outright prices were down only slightly as the May futures contract on the NYMEX lost seven cents to settle at $15.54.
Traders continued to talk about the weakness of West Texas Sour/Midland and the lack of storage space in the U.S. Midwest, including at Cushing, Oklahoma. The spectre of large quantities of foreign crudes expected to land in the next several weeks also will keep prices and differentials weak, traders said.
There was little impact of weekly petroleum inventory statistics on physical or paper markets on Wednesday.
There was a 1.6-million-barrel build in crude oil stocks for the week ending March 27, the U.S. Department of Energy reported Wednesday morning.
On Tuesday, the American Petroleum Institute reported that crude oil stocks rose in the U.S. 2.2 million barrels.
Traders differ on how long WTS will continue its weak trend. Some say that the weakness will last all summer, not helped by the making of asphalt for road construction or the summer driving season and motorists appetite for gasoline. One trader said the asphalt season will not be strong this year because of a mild winter, which did not damage roads as much as usual.
Other traders say that West Texas Sour will rebound in the next month, saved by an increased demand for both asphalt and gasoline.
Differentials for sour crudes should remain weak until the crude stocks of the U.S. Midwest, PADD 2, decline said a trader for a U.S. major. There simply is too much sour and all grades of crude in storage, he said, ''If you wanted to store some crude at Cushing, you'd have to build a new tank.''.
''The weakness will continue until late summer,'' he said. ''It's going to be a good refining season, more from weak crude (prices) than from strong product demand.''
When the May exchange-for-physical premium of eight to 10 cents is factored in, the benchmark cash crude West Texas Intermediate/Cushing was talked in a range of $15.61 to $15.67.
The EFPs attract buyers who wish to ensure that they receive WTI/Cushing rather than one of several foreign crudes that are also accepted as delivery crudes on the NYMEX.
One trader at a major U.S. oil company said he expected EFPs to strengthen in the coming days as more foreign crudes enter the U.S. market. He said EFPs of almost 20 cents are possible before the end of front-month trading on the NYMEX May contract. Before the expiration of the April NYMEX contract, EFPs were trading at 15-cent premiums to WTI/Cushing.
LLS was done at 58 and 55 cents under WTI/Cushing and pegged at -60/55.
WTS was done at minus $2.27/2.29/2.28 and pegged at -$2.28/2.22, unchanged.
WTI/Cushing postings-plus remained at $1.99/2.01 on Wednsday and was done at $1.99 over WTI/Cushing.
WTI/Midland was unchanged and pegged minus 38/35 cents to WTI/Cushing.
Heavy Louisiana Sweet/Empire was talked at a slightly wider range but near Tuesday's levels. It was pegged on Wednesday morning at minus $1.20/1.15 from WTI/Cushing. HLS was done at $1.20 under WTI/Cushing.
Eugene Island crude was done at $2.00 under WTI/Cushing and talked in the range of minus $2.05/1.95.
Bonito Sour was talked at minus $1.65/1.50, and one broker said there was a -$1.50 bid but no offers.
There was only scant talk about offshore sours Mars and Posiden. Mars was offered at -$4.00 and -$3.90. Posiden was offered at -$4.30 and bid at $4.80.
NYMEX Natural Gas Ends Down, AGAs Stir Little Reaction
NEW YORK, April 1 - NYMEX Hub natural gas futures, hit by a steady stream of profit taking Wednesday afternoon, ended lower across the board in active trade, then reacted little on ACCESS after supportive weekly inventory data, sources said.
''The market got a little ahead of itself, and with power coming off, you had to get some profit taking. The AGA number was non-event,'' said one Texas-based trader, adding he did not expect much more upside until better demand kicks in.
In the day session, May slipped 2.1 cents to close at $2.501 per million British thermal units after earlier hitting a new high of $2.56. On ACCESS, May traded between $2.485 and $2.505 shortly after the AGA data. June, which earlier hit a new benchmark of $2.59, settled 2.4 cents lower at $2.533, then retreated to $2.52 in the after-hours session. Other months ended down by 0.6 to 3.9 cents.
AGA said Wednesday that U.S. gas stocks fell last week by 20 bcf, in line with Reuters poll estimates in the 15-25 bcf range. Overall storage slipped to 175 bcf, or 21.1 percent, above last year.
Eastern stocks fell 38 bcf and were 29.6 percent above last year. Consuming region west storage, which gained five bcf last week, was still 5.4 percent over 1997 levels. Inventories in the producing region rose 13 bcf for the week and remained 18.9 percent over year-ago.
Forecasts for the remainder of the week call for more seasonal weather in the East and Midwest, with temperatures expected to slip Thursday to four to eight degrees above normal in Mid-Atlantic states. Texas and the Gulf Coast are expected to remain normal or slightly above for the period.
Technical traders said May's lower close today after hitting a new high raised the possibility of a key reversal. But while some said the market may be poised for further correction, most said the charts remained bullish.
May support was seen first at the previous contract high of $2.46 and then at the $2.33 double bottom. Next support was pegged at $2.30, the fifty percent retracement point. Major buying was expected at the $2.135 recent low.
May resistance was now seen at the new high of $2.56. Further selling was expected at $2.57 and $2.812, prominent spot continuation highs from December.
In the cash Wednesday, Gulf Coast swing quotes firmed almost 10 cents to about the $2.40 level. Midcon pipes were more than 10 cents higher in the mid-to-high $2.30s. Chicago city gate gas also was 10 cents or more higher in the mid-to-high $2.50s, while New York was up almost 10 cents to the mid-$2.60s.
The NYMEX 12-month Henry Hub strip lost 3.4 cents to $2.581. NYMEX estimated Henry Hub volumes were not available at 1630 EST.
U.S. Spot Natural Gas Prices Rise With Storage Demand
NEW YORK, - U.S. spot natural gas prices turned stronger Wednesday as the start of April spurred more storage buying interest and cooler than normal weather in the West still triggered some incremental demand, market sources said.
Henry Hub swing cash prices started this morning's trading near $2.50 as buyers snatched up some aftermarket supply for storage injections and incremental demand in the West.
But supplies flooded the market late, pushing prices to about $2.40 at Henry Hub by late morning, traders said.
There was also another volatile session in the Midcontinent market, where gas traded mostly in the mid-to-high $2.30s, up about 12 cents from Tuesday.
At the Chicago city-gate, prices climbed about 10 cents to the mid-to-high $2.50s.
In western Texas, Permian Basin prices were also quoted firmer at $2.23-2.29, while San Juan prices were talked mostly at $2.15-2.18.
In the Northeast, New York city-gate prices followed Gulf values higher to the mid-to-high $2.60s, while Appalachian values on Columbia were quoted at $2.56-2.60.
Forecasts are calling for more seasonal weather for the remainder of the week throughout most of the East and Midwest, with temperatures expected to slip Thursday to four to eight degrees above normal in the Mid-Atlantic states. However, another blast of warm weather is forecast to return early next week, according to Weather Services Corp.
Separately, estimates for today's American Gas Association storage report were mostly a draw of 15-25 bcf, according to a
Canadian Spot Natural Gas Prices Continue Steady Climb
CALGARY, April 1 - Canadian spot natural gas prices, buoyed over the last few weeks by fears of supply shortfalls, continued to rise on Wednesday with gas at Alberta's key pricing point breaking the C$2 per gigajoule barrier for the first time since last autumn.
''There's a little panic buying in the market,'' a Calgary-based trader said. ''Producers are short and they are in there trying to pick up gas.''
Spot gas at the AECO storage hub in Alberta was quoted in the C$2.04/2.045 per GJ range on Wednesday, up about seven cents from Tuesday. It was the first time it broke C$2 since a brief runup in late October 1997.
April and summer term gas, meanwhile, was talked at about C$2 per GJ, up about three cents on the day.
Prices have either risen or held steady for the last 15 days amid mild regional temperatures.
The trader said several gas producers had been stung by a shorter than usual winter drilling season, which resulted in fewer wells being drilled than had been planned as well as delays in tying new ones into pipeline systems.
That meant reduced supplies on the NOVA Gas Transmission Ltd intra-Alberta pipeline network. ''Nothing's materializing in the way of field receipts,'' he said.
With gas plant maintenance season set to begin shortly, prices were not expected to experience any short-term weakness, marketers said.
Prices in British Columbia also strengthened on the back of the Alberta market, said a trader of B.C. gas.
Westcoast Compressor Station 2 gas was quoted on par with AECO on Wednesday, up about a dime from the day before.
That pushed prices for export gas at the Huntingdon-Sumas border point on the west coast up about seven cents on the day to US$1.61/1.66 per million British thermal units.
''Everything's strong and it's all off the heels of Alberta,'' the marketer said.
He also said overnight temperatures in the region were cool enough to boost utility loads for heating.
In the east, gas at Dawn and Niagara in southern Ontario fetched US$2.60/2.65 per mmBtu, up about nine cents from Tuesday, in response to strong prices for the NYMEX May futures contract, sources said. |
