MARKET ACITIVITY/TRADING NOTES FOR DAY ENDING FRIDAY APRIL 24, 1998 (4)
OIL & GAS
OPEC Eyes More Output Cuts To Boost Prices
ABU DHABI, April 25 - Powerful oil states in the Organisation of Petroleum Exporting Countries may cut supplies to the industrialised world in another attempt to lift prices from their lowest level in nine years.
OPEC President and UAE Petroleum and Minerals Resources Minister Obeid bin Saif al-Nasseri said on Saturday that the 11-member cartel would be willing to curb exports when ministers meet in June if other global producers were cooperative.
"If the oil price stays where it is now there will be a lot of talk about further cuts and we don't rule out any possibility. If it is necessary, I think this can happen," Nasseri told Reuters in an interview at his offices.
World benchmark Brent for June delivery closed in London on Friday at $13.90 a barrel, compared with more than $20 last year, slashing revenues of OPEC states which rely on petrodollars for around 80 percent of government income.
Oil prices have stagnated despite a ground-breaking deal in Riyadh last month between OPEC and non-OPEC producers that aimed to shave some two percent from world supplies.
OPEC ministers agreed at an emergency session last month to contribute a cut of 1.245 million barrels per day (bpd) to the so-called Riyadh pact, its first output cut in a decade.
Despite the cuts, prices have remained capped by surplus supply, faltering demand in Asia because of the region's economic crisis, increased flows from Iraq under the United Nations oil-for-food deal and warmer than expected weather in the northern hemisphere.
"The fair price we would look for...it should be above $20...Although the price has come up a little bit since the Riyadh pact, the price is still low," Nasseri said.
Nasseri's comments echoed remarks by Saudi Arabia's Oil Minister Ali Naimi, who has said the group would be willing to consider further cuts if necessary at the June 24 meeting in Vienna.
Nasseri stressed that OPEC would swallow further reductions only if there was "cooperation and understanding" from non-OPEC states.
He said talks between both groups were continuing. "The cut depends on the oil price and also an understanding between the two groups.
"We feel that the responsibility of the oil prices does not rely only on OPEC members...The non-OPEC countries have also a responsibility and interest in seeing the oil price a little bit higher," the OPEC president said.
Nasseri said non-OPEC Syria was one of the countries that would be cooperative.
Syria was not among the countries that signed up to the original Riyadh pact.
"I think now we are in a new era of cooperation between OPEC member countries and non-OPEC," said Nasseri, who has day-to-day control over the UAE's 2.3 million barrels of daily oil production.
Nasseri said it was unclear what volume needed to be cut from the market, but he said reductions should be made on a pro-rata basis.
OPEC states -- which account for some 40 percent of world supplies -- were committed to carrying out the cuts under the Riyadh pact but it was still too early to say what volume of crude had actually been removed from the market.
Oil Markets Dip Again As Oversupply Pressures
LONDON, April 24 - Global oversupply kept the pressure on oil markets on Friday, tugging benchmark Brent crude prices under $14 a barrel for the second straight day.
Benchmark Brent blend for June loading closed eight cents down at $13.90 a barrel.
Prices have come under pressure from New York this week from increased U.S. stocks of crude and gasoline and a subsequent shortage of storage space.
But price changes have generally been small, with bearish sentiment due to the U.S. glut repeatedly curbed by technical factors.
"The overall problem for the complex remains crude supply, with storage brimming in the United States," Leslie Nicholas at GNI Research London said in his daily report.
The U.S. Department of Energy has said that this summer could see the biggest seasonal demand growth for a decade, at 2.8 percent.
But hopes of a strong U.S. summer driving season were dampened by data from the American Petroleum Institute showing a steep 1.35 million barrel rise in gasoline stocks.
Gasoline prices received a boost in New York on Friday, however, after Sun Co Inc announced a delay in restarting a unit at its Philadelphia refinery.
But it also said it had cut crude processing by 100,000 barrels a day due to the glitch, dealing another blow to crude markets.
Producers have seen Brent average 25 percent less so far this year than its 1996 and 1997 average price, cutting export earnings for OPEC member states by billions of dollars in the first quarter of 1998.
Dealers are pinning their hopes of a price rescue on an oil producers' pact which on paper should extract 1.5 million barrels a day (bpd) from the 75 million barrel daily world market.
But they have still to see firm evidence of the reductions which came into effect on April 1, led by a 1.25 million bpd reduction by members of the Organisation of the Petroleum Exporting Countries.
Concerns over the long-running dispute between the United States and Iraq over U.N. weapons inspections were on the backburner in the absence of further developments.
A news conference by Iraq's foreign and oil ministers scheduled for Friday was postponed until next Tuesday.
The two are in New York to lobby U.N. Security Council members ahead of a council review next Monday of sanctions imposed on Iraq after its invasion of Kuwait in 1990.
"Clearly there will be no change to the sanctions regime in the near term, but direct talks between the two main players can only help," said Nicholas at GNI Research.
NYMEX Crude Finishes Modestly Lower
Crude oil futures finished modestly lower and petroleum-products futures closed mixed Friday on the New York Mercantile Exchange, following Thursday's sell-off.
June crude fell $0.10 to settle at $15.09.
Earlier Friday, gasoline received support on news that Sun Co. had halted efforts to restart a 68,000-barrels-a-day catalytic cracker at its 307,000 barrels-a-day refinery in Philadelphia. In a press release Thursday, the company said it won't know how long the unit will be shut until after a visual inspection of the cracker. The market had expected the unit to be back up early next week.
Shell Oil Co. also said it shut its 150,000-barrel-a-day Shell Martinez Refining Co. catalytic cracking unit in San Francisco. Shell wouldn't comment on how long its cracker would be down, but an industry source estimated the unit cracker would be back up between April 30 and May 4.
May gasoline hit a session high of 51.10 cents a gallon shortly after the opening, but faded a bit by midmorning. May heating oil followed suit, hitting a high of 43.30 cents. Heating oil managed to hold modest gains.
June crude oil lacked direction. Concerns that Cushing, Okla., oil storage facilities were full kept buyers at bay. Cushing is the delivery point for physical crude traded against Nymex crude oil futures.
News that Russia is urging the United Nations Security Council to halt inspections of suspected Iraqi nuclear facilities had little impact on values. Diplomats at the U.N. on Friday, speaking on condition of anonymity, circulated a draft resolution to Security Council members late Thursday. U.N. inspectors have reported no evidence that Baghdad is developing nuclear weapons, prompting the Russians to request that the U.N.-affiliated International Atomic Energy Agency, which performs inspection in Iraq, shift to "passive monitoring" of known Iraqi research facilities.
NYMEX Natural Gas Recovers Slightly But Still In Range
NEW YORK, April 24 - The previously volatile NYMEX Hub natural gas market was quelled Friday by the need to consolidate ahead of the weekend, industry sources said.
May, set to expire Tuesday, finished up 1.4 cents at $2.342 per mmBtu after wobbling between only $2.31 and $2.365 all day. June settled a half cent firmer at $2.373, while other deferred months in 1998 were also about one cent higher.
"It needed to consolidate today. It couldn't keep on going the way it was. And cash and futures are pretty flat," one market source said, referring to the convergence between Henry Hub May futures and April cash.
The May market staged a 10 percent retracement over Wednesday and Thursday, falling to a low of $2.30, which is now a major support level, sources said.
After $2.30, May support was seen at $2.25, $2.21, the March 18-19 low at $2.18 and the $2.135 low from March 16. Resistance was pegged at $2.38, and then at $2.41, $2.435 and $2.48.
Henry Hub cash was similarly quoted mostly at $2.30-2.31, while Midcontinent prices slipped into the mid-teens. Chicago city-gate gas sold at $2.33-2.34, while New York city-gate business finished in the mid-$2.50s.
Open interest continued to wane, falling another 6,361 on Thursday to 253,392. NYMEX volumes were not yet available.
Meanwhile, the 12-month strip stepped up 0.9 cent to $2.480.
On KCBT, May finished two cents higher at $2.25, while physical gas at Waha slipped to about $2.20.
Warmer-than-normal weather is expected to cover most of the U.S. next week, with temperatures seen jumping to eight to 13 degrees above normal early next week in the Chicago area and to 10-15 degrees above normal in the Northeast on Wednesday and Thursday.
US Spot Natural Gas Prices Sail Lower Ahead Of Weekend
NEW YORK, April 24 - U.S. spot natural gas prices continued to soften Friday before settling near futures values ahead of a warmer than normal weekend, industry sources said.
Cash prices at Henry Hub mirrored futures today at $2.27-2.34 per mmBtu following this week's rollercoaster ride of price action. Today's prices were off about five cents from Thursday and about 10 cents lower than week-ago levels.
In the Midcontinent, gas traded off an equal amount to about $2.17, with Chicago city-gate pegged mostly at $2.33-2.34.
In the West, where above-normal temperatures were expected to return this weekend and continue through next week, southern California border prices slumped into the mid-to-high $2.30s.
Permian prices were also pressured by the excess supply of gas in the market, with deals reported done anywhere from $2.00 to $2.20. Most business hovered around $2.10. San Juan values similarly plummeted late to $1.85-2.06. In the Northeast, prices felt pressure from milder weather in the region. New York city-gate deals were reported done in the mid-to-high $2.50s, while Appalachian values on Columbia were also down a few more cents to $2.415-2.46.
Canadian Spot NatGas Prices Soften In Light Trade
NEW YORK, April 24 - The anticipation of more weekend supply and mild weather continued to chip away at Canadian spot natural gas prices on Friday, traders said.
Spot gas at the AECO storage hub in Alberta was quoted at C$1.99-2.00 per gigajoule (GJ), down from C$2.01-2.02 on Thursday.
However, May prices were talked a little higher at C$1.98-2.00 from C$1.95-1.98, while one-year business was reported done again at C$2.37.
Field receipts still totaled about 12.3 billion cubic feet per day, though an additional 300-400 million cubic feet per day of gas was expected to return to the market over the weekend following NOVA outages, which may spur heavier injections.
Injections in the west on Thursday tallied up to 577 mmcfd, from 355 mmcfd on Wednesday.
At the export points, Sumas prices shed about four cents to the low-to-mid US$1.60s per million British thermal units (mmBtu).
Eastern export prices at Niagara fell another three cents to about $2.43 per mmBtu amid a stagnant NYMEX market.
References:
Charts: oilworld.com
NYMEX Reference quotewatch.com
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