CRUDE OIL/PART 3 - International In Scope
FRIDAY MORNING - 10/30/98
10/30 00:37 US Crude Outlook -Hurricane, OPEC To Provide Boost
NEW YORK, Oct 27 - U.S. crude prices look set for a rally over the coming days, sparked by a powerful hurricane and signs that the recent flood of imports may soon slow to a trickle, traders said on Tuesday.
Expectations that crude prices would spend the next several days climbing higher came hard on the heels of an 18-cent burst on Monday, which took December West Texas Intermediate/Cushing prices above $14.25 a barrel.
U.S. crude traders said further gains should be around the corner, even though few anticipate OPEC ministers meeting later this week on the sidelines of a conference in Cape Town, South Africa, to reach another agreement on production cuts.
Indeed, Mexican Energy Minister Luis Tellez on Monday threw cold water on any lingering hopes of another production cut when he said that discussion would focus on compliance rather than new supply sacrifices.
But Kuwaiti Oil Minister Sheikh Saud Nasser al-Sabah offered a different view on Tuesday, vowing to support another round of production cuts.
OPEC producers have reached two production-cutting accords already this year, helping pull prices off 12-year lows of under $11.60 a barrel in June. U.S. crude prices eventually climbed to over $16.00 a barrel in late September.
But the gains were also due to a series of storms that pounded the U.S. Gulf of Mexico during the month, and with the fiercest hurricane of the season now swirling in the Caribbean, crude traders are keeping a close watch on potential supply disruptions.
"If this storm tracks north, the races will be on," one trader said.
In advance of Hurricane Mitch, which has sustained gusts of 180 mph, Mexico's state-owned oil company Petroleos Mexicanos (Pemex) said it had brought 80 percent of its offshore workers in the Campeche Sound back to shore on Monday.
U.S. sour crude prices received an immediate boost, and look set to remain supported until the storm's threat to supply passes. West Texas Sour/Midland prices have jumped by about 10 cents a barrel over the last several days, hitting a discount of $1.55 to WTI/Cushing.
Sweet crude has also made gains as stronger Dated Brent prices in Europe have closed down the arbitrage to bring North Sea crudes into the U.S. Gulf Coast.
Light Louisiana Sweet/St. James, the crude which competes most directly with North Sea Brent, found offers at no better than 10 cents under the benchmark on Tuesday.
"It's a combination of Dated Brent tightening, so the arbitrage is shutting down, and a certain amount of concern over West African supply," one trader said, in describing the jump in LLS differentials.
In Nigeria, violence has caused regular disruptions to oil supply over recent weeks as youths continue to protest against the government and oil companies.
Still, most U.S. traders claim that November and December crude shipments from the West African nation to the U.S. Gulf Coast haven't yet been significantly cut. Nigeria's Forcados is being discussed around 10 cents over Dated Brent, while Bonny Light and Qua Ibo are being valued at 10 to 15 cents over the international benchmark.
U.S. traders will also spend the next several days sorting out Colombia's latest Cusiana tenders, which were due to be awarded last week.
Several traders said Monday that state-oil company Ecopetrol didn't award the two tenders, each for about 1.1 million barrels.
For the moment, they added that Cusiana is being notionally assessed at $1.50 a barrel under WTI/Cushing.
10/30 00:39 US Products Outlook - OPEC, Mitch Support Sought
NEW YORK, Oct 26 - The return of U.S. refineries from autumn turnarounds continued to bear down on the outlook for oil products, but some bullish traders looked to the meeting in South Africa this week of OPEC producers, Hurricane Mitch and weakening refining margins for support.
Sun Co. Inc. <SUN.N> restarted its 177,000 barrel-per-day (bpd) crude distillation unit at its Philadelphia refinery on Sunday, just part of around 430,000 bpd of production to return from maintenance shutdowns in the past week.
"The weekly American Petroleum Institute (AP) should show higher refinery runs...nothing else is very certain, so they'll be watched closely," said an analyst.
With the exception of heating oil prices in New York Harbor, both gasoline and distillates fell last week with Gulf gasoline registering the largest drop of 2.20 cents per gallon to 39.40 cents.
"Refineries coming back can only add to gasoline's glut," said one Harbor trader, although he added that short supplies of blending components for gasoline could limit builds in the API stock numbers to be released late on Tuesday.
Distillates in the Northeast were supported as traders with storage took advantage of the contango in the market to buy the cheaper prompt supplies of the heating fuel, lifting outright prices by over a penny to around 38 cents per gallon.
But lower product prices on the Gulf Coast in the last 15 days have cut refining margins in half to 28 cents per barrel of benchmark West Texas Intermediate crude processed, according to Reuters' calculations, based on standard product yields.
"Cracks look awfully cheap, especially on the prompt No.2 oil," a trader said. "I don't see any appreciable rise in runs this week."
Other traders were loathe to make predictions as long as there was a slight possibility that another hurricane could hit the Gulf Coast.
Hurricane Mitch, one of the strongest Atlantic storms ever recorded with sustained winds of 180 miles per hour -- considered a strong Category Five hurricane -- spurred some concern in the market.
But the National Hurricane Center said on Monday afternoon that Mitch, located in the western Caribbean, is not likely to reach the Gulf of Mexico.
"If it stays on its current course, very little impact on oil," one analyst said. "However, it looks like Mitch is going to move very slowly and direction is unclear. One forecast has it turning north, maybe into Mexico's Gulf of Mexico waters where there is significant oil production, and quite possibly later aiming at the U.S. Gulf Coast.
"Forecasters don't seem concerned yet, but this bears watching."
An informal gathering of OPEC ministers later in the week on the sidelines of an energy conference in Cape Town, South Africa, was also expected to keep sellers at bay despite much skepticism on further crude production cuts.
"With OPEC and Hurricane Mitch threatening, nobody is going to sell short and prices will be supported this week. But in the long term, I am bearish that the oversupply of crude is going to drag down prices," a trader said.
10/30 06:56 - Oil Prices Slip, Saudis Want Market "Anchor"
LONDON, Oct 30 - Oil prices drifted lower on Friday as Saudi Arabia called for fresh efforts to steady or "anchor" global oil markets and reduce price volatility.
But Riyadh and other leading oil producers have downplayed the prospect of deeper supply cuts and insist that a current deal be given more time to bite.
The world benchmark crude, Brent blend, was down eight cents at $13.00 at 1155 GMT and remains well below the $13.80 average seen so far this year. "Recently I have called for a coordinated ad hoc effort both within and outside of OPEC to anchor markets and lessen the impact of its absolute swings," said Saudi Arabian oil minitser Ali al-Naimi in Cape Town.
"I propose we pursue this idea further in this conference among the concerned parties," he told a gathering of oil ministers and senior officials from about 30 major petroleum consuming and producing nations.
Saudi Arabia spearheaded a 3.1 million barrels per day (bpd) cuts this year which have helped to stabilise oil markets after prices hit 10 year lows in the summer.
Over the past five years, oil prices have doubled and then halved again as OPEC tried to restrain surging output and demand faltered in battered Asian economies.
"To assure an adequate return to producers, the price of crude oil must be higher to justify the investment and keep supplies coming, yet not so high as to stifle demand or overstep competitive lines," said Naimi.
Naimi said determining a fair oil price and "setting the mechanism" to maintain it would be one of the main issues facing the world's oil market.
With oil prices in the bargain basement, OPEC's current deal to trim oil supply has acheived a relatively high degree of compliance from cash-strapped members.
On Thursday the President of OPEC said he was content with cuts agreed earlier this year but a closed door session of ministers went no further that discussing strategy ahead of the group's gathering in Vienna next month.
Smaller oil producers Algeria, Kuwait and Libya have called for deeper cuts but have found little support in the influential Saudi Arabian camp.
Naimi said recently that more cuts would only undermine the cartels market share. Riyadh appears to support an extension of the cuts to the end of next year rather than deeper cuts.
That is the option more likely to gain support from Venezuela which cannot afford more cuts.
Non-OPEC Mexico said it would support an extension of the cuts if OPEC agreed on that course next month and Norway said it would make up its mind by the end of the year.
OPEC members have delivered some 90 percent of the 2.6 million bpd pledged cuts, surprising many analysts who had expected a lower level of compliance.
But even with another 500,000 bpd of cuts from non-OPEC members such as Russia, Oman and Mexico, oil prices remain depressed.
Brimming oil storage tanks snuffed out a fledgling rally last month and many traders believe only a real chill this winter will help lift prices.
"I'll probably just go down south on holiday this winter if it's warm," said oil trader Jim McLaren of Alimar BV in Rotterdam.
Early NYMEX Futures Calls: Lower
New York 07:37 EST Oct. 30-FWN--
--Crude oil futures are called to open 5 cent to 10 cents lower.
--Heating oil futures are called 10 points to 20 points lower.
--Unleaded gasoline futures are called 10 points to 20 points lower.
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