MARKET ACITIVITY/TRADING NOTES FOR DAY ENDING THURSDAY, APRIL 16, 1998 (2)
OIL & GAS
Energy Exchanges Plan Global Link With Singapore
LONDON, April 16 - Energy futures exchanges in London and New York are set to include their Singapore counterpart to create a global electronic trading system, trade sources said on Thursday.
London's International Petroleum Exchange and New York's Mercantile Exchange are already working on a joint electronic platform for out of hours trade of the exchanges' crude and petroleum product futures contracts.
The system, based on the Electronic Trading System (ETS) platform developed for the IPE's natural gas contract, has been tentatively targeted for introduction in mid-1999.
Trade sources say Singapore's International Monetary Exchange is in negotiation to participate via a cut-price investment in the software development work on what has become known as ETS 2000.
The deal is at least in part to overcome the barrier represented by SIMEX's current exclusive right to trade the IPE's Brent crude oil futures contract during Asian hours, which the IPE has asked SIMEX to relinquish.
The IPE refused to comment on the plan for a tripartite alliance but said it was seeking to retain links with its Singapore sister.
"SIMEX Brent hasn't worked but we are trying to replace it with something else," an IPE spokeswoman said on Thursday.
"There are maybe other ways we (the two exchanges) can cooperate," she added, declining to elaborate.
Industry sources have already said SIMEX was open to the early curtailment of its failed five year contract with the IPE to trade Brent, due to end in June 2000, provided they achieve a satisfactory settlement.
Trade sources said the three-way link-up had a logic of its own.
"If there is going to be a global electronic trading system (for energy futures) you can't ignore Asia," the source said. "SIMEX can't be left out."
Energy futures have still to generate much enthusiasm in Asia and the Brent contract has attracted little market interest, trading just a few hundred lots a day in Singapore, compared to an average 50,000 daily in London.
But the three exchanges were reported to be hopeful the electronic system, with Brent clearing continuing in Singapore, would secure greater support in the Far East.
NYMEX has long courted the authorities in Singapore to permit installation of ACCESS terminals in the Asian oil trading hub.
The electronic partnership is one leg of measures to develop a hybrid trading arrangement in London that will include the retention of open outcry, the buying and selling of futures by traders shouting orders aloud.
The IPE, under pressure from members suffering from high costs and a commission war, may eventually cut back its 11 hours daily of open outcry and rely more heavily on electronic business. It has promised no changes for at least 18 months.
It is also considering moves to bigger premises as part of reforms designed to halt stagnating growth in its crude and gas oil (heating oil) futures contracts.
In contrast NYMEX business is booming, supported by ACCESS, its current after hours electronic trading system, which ETS 2000 will supersede. NYMEX says it will retain the ACCESS brandname for trade of its contracts on ETS 2000.
NYMEX's success has inspired it to take up the energy futures cudgel in Asia where it soon hopes to announce plans for a crude futures contract.
The Tokyo Commodity Exchange has also launched a crude price index it hopes will lead to an underlying futures contract.
Oil Moves Higher On Simmering Iraq Tension
LONDON, April 16 - Oil prices climbed on Thursday after Iraq demanded an end to U.N. sanctions and on reports that President Saddam Hussein might not allow unlimited access to weapons inspectors.
Benchmark Brent blend for June was up 45 cents at $14.66 a barrel by 1619 GMT.
Iraq warned that a ''new crisis'' could develop if the United Nations did not lift the trade embargo.
A statement issued by the ruling Ba'ath Party leadership and the Revolutionary Command Council after a joint meeting headed by Saddam called for the implementation of a U.N. resolution ''with no delay as a stepping stone to lifting the embargo completely and comprehensively.''
The United Nations passed a resolution after Iraq's invasion of Kuwait in August 1990 stipulating that sanctions could only be lifted once it was satisfied that Iraq had dismantled all weapons of mass destruction.
Iraq argues that it has complied.
Iraqi Trade Minister Mohammed Mehdi Saleh, asked if Iraq had dismantled all such weapons, told Reuters: ''Yes this is true.''
But a U.N. report on Thursday said Iraq had threatened to limit weapons inspections on designated presidential sites, despite making an agreement to allow free access to them.
''It seems Saddam Hussein wasn't so open about the inspections of the presidential palaces after all,'' one Brent dealer said.
Charles Duelfer, who led weapons inspections in March and April, said Iraq was still demanding limits to U.N. inspections despite February's agreement, made in the face of threats of U.S.-led air strikes.
Analysts said the market would not overreact to the renewed Iraqi tension and would level out in the $14.50-$15.00 range.
''We've seen this often before, haven't we?,'' said Chris Bellew, energy futures broker and director of brokerage Prudential Bache in London.
''I think probably the market is not ready to move significantly higher,'' he added.
Bellew said the overall outlook still hinged on the adherence to production cuts by world oil producers.
Iraq was exporting crude last week at a rate of about 1.57 million barrels per day (bpd), just under its 1.6 million bpd capacity, but the United Nations voted on Wednesday to allow Iraq to import $300 million worth of equipment to overhaul their oil facilities.
The market also got a boost late in the afternoon from a German buy tender for 22 million barrels of crude oil for its strategic stocks.
Thursday's gains follow a strong performance on Wednesday afternoon after Venezuela reiterated its commitment to cutting 200,000 bpd as part of a producers' pact meant to boost world oil prices.
NYMEX Crude Bounces On Iraq, Strong Gasoline
NEW YORK, April 16 - NYMEX crude and refined products ended with hefty gains Thursday as the market again grappled with issues affecting Iraq and their perceived effects on the flow of oil.
''The market moved up and stayed strong throughout the session,'' in reaction to news that Iraq's ruling party was seeking an end to U.N. sanctions against the country, said Energex Ltd's Dominick Cagliotti.
Any possible conflict that may arise from this development is viewed by the market as bullish because any disruption on the normal oil flow in the Middle East could strangle supplies.
Reports about problems in six U.S. refineries that have precipitated varying durations of outage and rumors of glitches in two others were also price-supportive, Cagliotti added.
At the back of overnight trading gains, NYMEX May crude settled at $15.90 a barrel, adding 44 cents on the day. Front-month crude hit $16.00, the day's high, in early afternoon and eased a bit toward the close.
The May gasoline contract settled at 52.75 cents a gallon, up 1.30 cents, as news of refinery woes, big demand seen in the coming driving season and residual effects of stock draws highlighted in weekly inventory reports combined to inspire bullish sentiment.
May heating oil benefited from the market's rise, settling at 44.60 cents a gallon, a gain of 0.98 cent.
''From a technical standpoint, the market slayed a lot of dragons today,'' said a Texas trader.
''The market has been under pressure for quite some time and today the longer-term indicators turned positive,'' he said.
The pressure has been eased and ''I see more moves on the upside,'' he added.
A report by U.N. Secretary General Annan Kofi showing that Iraq can produce only $3 billion worth of crude for any six months in 1998 even if its damaged oil facilities were repaired has lent support to crude, traders said.
The U.N. approved in February an increase in Iraq's oil sales to $5.256 billion for every six months from the current $2 billion, but Iraq has said it can only produce $4 billion.
''The thought that Iraq's crude producing and exporting capabilities are less than previously thought is at least somewhat bullish, enough to feed the price rebound from the range bottoms,'' said a Houston based analyst.
International sanctions, including an oil embargo, were placed on Iraq when Saddam Hussein invaded Kuwait in August 1990 in a move that precipitated the Persian Gulf War.
''The pressure on the market has been alleviated for the moment,'' the Texas trader added.
U.S. Cash Crude - LLS Hit, Storage At Cushing Weighs
NEW YORK, April 16 - The problem of full storage at the pipeline hub at Cushing, Oklahoma continues to weigh on domestic crude price differentials, though outright prices were on the rise again on Thursday, traders said.
The main action in the early session was selling of Light Louisiana Sweet/St. James (LLS), which traded at discounts between 83 cents and 87 cents to the West Texas Intermediate/Cushing benchmark (WTI), down from a 73/78 cents range on Wednesday.
Heavy Louisiana Sweet/Empire (HLS) fell in sympathy to a $1.22 discount and West Texas Sour/Midland also lost ground to $2.20/$2.21 under.
The latest sympton of the clogged up market was the Seaway Pipeline into Cushing, operated by ARCO Pipeline, which traders said had to be slowed on Wednesday.
ARCO officials weren't immediately available for comment, though one Oklahoma crude trader said: ''We heard that they were running below normal capacity yesterday but saying they could get it back up to normal for the rest of the month. It always evens itself out but that tells you that Cushing is full, it's just a mess up there.''
Another trader said that Arco crude traders had sold a Nigerian Bonny Light cargo scheduled to move up the pipeline to Cushing to make room, though the trade couldn't immediately be confirmed.
LLS has been declining for months relative to the benchmark and has lost a total of about 30 cents in differential since the end of March. Competition from foreign sweet grades, including North Sea Brent, has been one factor and traders said Thursday that recent trans-Atlantic arbitrage means there is more Brent headed toward the U.S. Gulf.
Meanwhile, in the broader market prices were on a firming trend again, mainly on Iraqi news. A report by the United Nations painted a bleak picture of Iraq's oil industry and said it was likely to be able to pump only slightly more oil this year, even after repairs to wells and pipelines are affected.
The Iraqi official news agency also reported that Iraq's parliament was ''running out of patience'' with U.N. sanctions, suggesting there may be another period of tension between Baghdad and the U.N. in the offing.
NYMEX Natural Gas Treads Higher Early Amid Steady Cash
NEW YORK, April 16 - NYMEX Hub natural gas futures mimicked yesterday's trading session on Thursday morning, moving higher early amid talk of firm cash prices, industry sources said.
At 1121 EDT, May was up 1.9 cents at $2.54 per mmBtu but still reluctant to stray very far from recent ranges. June rose 2.2 cents to $2.58, while other months in 1998 were also up about one to two cents.
The cash market followed a similar pattern, with Henry Hub quoted at $2.49 and Midcontinent pipes seen in the high-$2.30s to about $2.43. Chicago city-gate deals were reported done in the mid-$2.50s, while Appalachian gas on Columbia Gas sold at $2.61-2.63. South Texas prices were pegged in the low-$2.40s.
Technically, the higher lows over the last two sessions may point the market to the upside, traders said, referring to the uptrend line forming. May resistance was seen around $2.56, with more selling expected to surface around $2.60-2.62, and then at $2.635, the $2.725 contract high and the low-$2.80s. Support was around $2.50, followed by stronger support at $2.465 and the double bottom at $2.33.
Despite the American Gas Association's storage report showing a build of 22 bcf in the U.S., some traders were keeping a closer eye on western storage, which has become a stronger factor in the market over the last few months. Stocks in the West were down three bcf last week, slipping to seven bcf behind year-ago tallies and 62 bcf below 1996 levels. Overall stocks, however, stretched their surplus on year-ago inventories to 245 bcf. Compared with 1996 levels, U.S. storage moved ahead last week by 535 bcf.
Warmer-than-normal weather is forecast to continue in the Northeast through early next week, while slightly below-normal temperatures are expected to cover the central U.S. over the next few days. Highs in Houston are expected to dip to about 69 degrees F on Saturday, while warmer weather is forecast to arrive in the Southwest by Friday, Weather Services Corp said.
As of 1115 EDT, 13,770 Hub contracts had traded on NYMEX.
Meanwhile, KCBT's May contract rose a half-cent to $2.415, backing off from an earlier $2.45 high.
U.S. Spot Natural Gas Market Sees Weaker Prices Late
NEW YORK, April 16 - U.S. spot natural gas prices on average were little changed on the day despite some late weakness in the market, industry sources said Thursday. Henry Hub swing gas traded early at $2.51, but by late morning prices slid to as low as $2.45.
In the Midcontinent, prices moved to a high of $2.43 early and then retreated to the high-$2.30s shortly before nomination deadlines. Chicago city-gate prices were quoted at $2.53-2.56.
In the West, where another three bcf loss in inventories was shown in American Gas Association storage report, southern California border prices tacked on about three cents to $2.64-2.68. Also contributing to the stronger market, traders said, were the firmer prices in western Canada.
Permian prices were also quoted a little higher at $2.34-2.38, while San Juan values similarly climbed to $2.32-2.33.
In the Northeast, New York city-gate prices remained in the low-to-mid $2.70s, and Appalachian values on Columbia were also fairly steady in the low-$2.60s.
Warmer-than-normal weather is forecast to continue in the Northeast through early next week, with temperatures expected to average 10-15 degrees above normal Friday. Mostly below-normal temperatures are expected to cover the central U.S. over the next few days, while warmer weather is forecast to arrive in the Southwest, Weather Services Corp said.
Separately, AGA said Wednesday overall gas stocks rose 22 bcf last week to 34 percent of capacity, stretching the surplus on year-ago inventories to 245 bcf.
Canadian Spot Natural Gas Prices Turn Slightly Firmer
NEW YORK, April 15 - Canadian spot natural gas prices clambered higher Wednesday amid an ongoing tight supply situation and firmness on NYMEX, traders said.
Spot gas at the AECO storage hub in Alberta was quoted at C$2.33-2.34 per gigajoule (GJ), about three cents higher than yesterday and a week ago.
May business was reported done at C$2.29-2.33 from C$2.25-2.27, while summer quotes were heard at C$2.20-2.24. One-year prices at AECO were also quoted a little higher at C$2.49-2.53 from C$2.48 per GJ.
Storage injections in the west totalled 220 million cubic feet per day on Tuesday, while field receipts were still hovering around 12.5 billion cubic feet per day, a Calgary based trader said.
In the export markets, Sumas, Wash., prices tacked on about seven cents to US $1.98-2.00 per million British thermal units (mmBtu), indicating a weekly gain of 12 cents.
Gas for export at Niagara also traded higher at US$2.62 per mmBtu in tandem with a slightly firmer futures market. However, prices were off about 18 cents from week ago levels.
REFERENCES
Charts: oilworld.com
NYMEX Reference quotewatch.com |
