CRUDE OIL / International Scope
10/28 18:54 Oil Market Awaits Hurricane Mitch's Next Move
MEXICO CITY, Oct 28 - Although Hurricane Mitch has forced the suspension of most of Mexico's oil exports and shut in 830,000 barrels per day (bpd) of production, analysts said on Wednesday they were more concerned about the mighty storm's next move.
Mitch -- one of the strongest storms this century -- was still hovering along Honduras' Caribbean coast late Wednesday, but if it veers westward toward Mexico's Yucatan peninsula and stays in Mexico through Monday, it could cut Mexico's oil output significantly, analysts say.
On Wednesday, Mitch's winds dropped to 120 mph (190 kph) from a previous peak of 180 mph (295 kph). But the hurricane still packed enough punch to punish nearby Honduras on Wednesday, causing flash floods and mudslides that killed at least 13 people along that country's rain-soaked Caribbean coast. Death toll so far from Mitch's four-day rampage through the region totaled 19 by late Wednesday.
Top officials from oil monopoly Petroleos Mexicanos (Pemex) met early on Wednesday to decide how to prepare for the possible threat from Mitch of sustained winds of 122 mph (195 kph).
In October 1995, Hurricane Roxanne battered the Gulf of Mexico and forced the state-run oil giant to stop virtually all its drilling activity for eight days.
Mexico's oil exports account for a third of its government revenue. And 79 percent of those exports go to the U.S.
This week, Pemex shut down two of its shipping ports in the Gulf of Mexico -- Dos Bocas and Cayo Arcas -- suspending exports of about 1.246 million barrels per day (bpd) for as long as poor weather threatens the region. Exports from the ports are mostly of heavy Maya crude.
Mexico has fixed exports through the end of the year at 1.64 million barrels per day (bpd).
At Pajaritos oil port in Veracruz state, oil shipments were normal, an official there said.
Analysts said oil markets were not very worried about Mitch, but were keeping an eye on the storm to see where it moves next or how long it batters the region.
"I think it's largely been ignored by the market right now, but I think its a concern," Prudential Securities oil analyst Richard Redash said.
"Duration is an issue and so is the impact," Redash continued. "It's going to take barrels away from the market. But the longer it sits there, the more barrels it takes away... so prices go higher."
Pemex said late on Tuesday it had shut in 830,000 bpd of crude from the Campeche Sound, where production on average this year has been 2.2 million bpd. Mexico's total oil output is about 3.2 million bpd.
The energy monopoly also stopped producing 812 million cubic feet per day (cfd) of natural gas output, out of a total of 1.618 billion cfd produced in the region.
But analysts said the oil markets will only focus on Pemex's lost production if the hurricane stayed through the weekend.
If the hurricane were to stay through Monday, nearly five million barrels would be shut in, noted Rafael Quijano, managing partner at Latin America Petroleum Services, an energy consulting group in Washington, D.C.
"There won't be a significant loss of oil on the market unless the hurricane moves more up the coast, then the accumulated effect could grow," Quijano said.
Hurricane Mitch hovered stubbornly off the northern coast of Honduras on Wednesday, although forecasters have said it could still shift toward the Yucatan peninsula before striking land later in the week.
But meteorologists are still reluctant to forecast where the storm could move.
"The threat to the producing areas on the Gulf is somewhat reduced, but there could be danger, if Mitch hits water and gathers strength again," one NYMEX trader said.
Quijano added that Pemex's oil port capacity was limited and canceled exports would not be loaded and shipped right away.
10/28 17:02 - Oil Firms As OPEC Splits On Extra Cuts
LONDON, Oct 28 - Oil prices firmed on a bout of late short covering on Wednesday, as OPEC ministers gathering for talks in South Africa bickered about whether there should be further producer cuts.
Benchmark Brent blend settled 23 cents higher at $13.17 a barrel, taking strength from rallying crude oil futures and a perkier petroleum products complex in New York.
The November contract gained 35 cents in the last hour or so of trade as NYMEX crude sped through $14.20 a barrel triggering buy-stops in the process.
November Brent had drifted drearily under the psychologically significant $13.00 mark for most of the day before speculators and locals back pedalled on long positions to avoid being caught short.
Despite the late rise, which came ahead of the three-day Cape Town conference which begins formally on Thursday, global oil prices are still some eight dollars below last October's average price.
A huge crude stock build in the vast U.S. market signalled more potential misery for cash-pinched oil producers as OPEC ministers arrived in South Africa.
Stock data by the American Petroleum Institute (API), a key pointer to trends in the world's biggest petroleum market, showed a crude inventory build of nearly eight million barrels last week, double what market watchers had expected.
Crude flooded into storage even though refinery throughputs rose by nearly two percent, churning out an additional 258,000 bpd of oil products.
A rare bright spot came from a cut in gasoline stocks, which have at last fallen below year-ago levels.
The bearish signal renews pressure on oil ministers to act to boost prices when they meet this week.
Algerian Oil Minister Youcef Yousfi said on arrival in Cape Town that he wanted OPEC to cut output further as soon as possible.
He will line up with Kuwaiti Oil Minister Sheikh Saud Nasser al-Sabah, who says he believes OPEC has the will for further cuts to add to its 2.6 million barrels per day (bpd) of output sacrifices so far this year.
Mohammad bin Hamad bin Seif al-Ramhi, oil minister for non-OPEC Oman, added his weight behind deeper output reductions.
But Saudi Arabia, Venezuela and non-OPEC Mexico, the architects of this year's supply cutbacks, have all poured cold water on prospects for more reductions.
OPEC kingpin Saudi Arabia dampened expectations of further action on Tuesday with its sharpest call yet for the export cartel to comply fully with supply sacrifices already promised.
Saudi Crown Prince Abdullah, in a rare public statement, said other OPEC nations were to blame for a sustained oil price depression for failing to live up to agreements on supply cuts.
Mexican Oil Minister Luis Tellez on Wednesday ruled out any further oil output cuts, suggesting instead that the current production restrictions be rolled over through the end of 1999.
United Arab Emirates Oil Minister Obaid bin Saif al-Nasseri, Qatari Oil Minister Abdullah bin Hamad al-Attiyah and OPEC Secretary-General Rilwanu Lukman all played down the likelihood of further producer action in Cape Town.
OPEC is due to hold its next ministerial meeting in Vienna on November 25.
10/28 17:03 NYMEX Crude, Products End Higher On Short-Covering
NEW YORK, Oct 28 - A spate of late short covering pushed up December crude on the New York Mercantile Exchange (NYMEX) Wednesday, negating sell-off losses in reaction to a larger than expected build in crude stocks, traders said. "After speculators liquidated long positions on the API stats, some big commission houses came in buying late in the session after we hit $14.20," said a NYMEX floor trader.
December crude settled at $14.29 a barrel, gaining 16 cents from Tuesday's settlement, but easing from its session high of $14.30. In earlier trade, the contract dipped to $13.92, where it gathered support.
November heating oil gained 0.04 cent, ending at 38.83 cents a gallon, cents, after it climbed from a low of 38.25 cents.
November gasoline finished at 44.76 cents a gallon, up 0.62 cent, just off its session high of 44.85 cents a gallon. In earlier trade, the contract dipped as low as 43.90 cents.
In London, IPE December Brent ended at $13.17 a barrel, up 23 cents, in a late short-covering rally.
One Washington-based trader said the "weather bulls ran into reality last night" in the wake of the large API stockbuild.
He said the bulls who speculated that Hurricane Mitch, the fiercest storm to hit the Atlantic in a decade, would put production in the Gulf of Mexico and along the Gulf Coast at risk, liquidated long positions, moving prices lower early.
"They ran into the API's unexpectedly large weekly stockbuild," he said. The market had expected a build of about 4.0 million barrels.
The American Petroleum Institute, in its inventory report for the week ended Oct. 23, said late Tuesday that U.S. crude stocks rose nationwide by 7.9 million barrels to 335.7 million barrels -- 29.5 million barrels more than they were a year ago.
The API said gasoline stocks dropped 2.1 million barrels to 197.3 million barrels, 388,000 barrels less than a year ago. Distillate stocks, which include heating and diesel oil, rose 637,000 barrels to 147.8 million barrels, some 11.7 million barrels more than a year ago, the API said.
The Department of Energy, in its own inventory report issued Wednesday morning, put the crude build at a lower 3.7 million barrels, within market expectations. It also reported a lower gasoline stockdraw of 1.7 million barrels and a lower stockbuild of distillates of 200,000 barrels.
Traders said many players appear to be largely discounting Hurricane Mitch as a threat to oil supply. But some still worry that Mitch might strengthen and veer north to the Gulf of Mexico, endangering production facilities there.
As of early Wednesday, Mitch had weakened to a Category 3 hurricane as it dragged itself slowly westward. Nonetheless, weather forecasters continue to warn that Mitch was still dangerous and capable of extensive damage.
Wally Barnes, a forecaster at the National Hurricane Center in Miami, said Mitch's direction was hard to predict. He said it was heading due west and most likely would plow through Belize and Mexico. It could also move north or south, but would weaken as it passed over land.
Meanwhile, news that some oil producers were calling for more production cuts had little impact on the market, traders said, because the biggest producers -- Saudi Arabia and Venezuela -- have said they do not favor any more reductions.
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