CRUDE OIL PRICING & RELATED / PART 2 - International In Scope
11/06 04:48 US Crude Outlook -Iraq gives boost despite imports
NEW YORK, Nov 2 - U.S. crude oil traders were cautiously optimistic about oil prices on Monday, after crude futures began the week on a high note, supported the growing tension between Iraq and the international community.
"I think we've been making a bottom in crude," said Warren Tashnek, of FIMAT USA Futures. "Obviously, the Iraqi news is helping the market," he continued, but added that he was bullish about crude prices even before Iraq's Parliament decided to halt cooperation with arms inspectors.
On Monday, Iraq's Parliament voted to halt cooperation with U.N. inspectors until the U.N. Security Council reviews lifting the sanctions imposed on Iraq after the Gulf War.
U.S. President Bill Clinton demanded that Iraq allow United Nations weapons inspectors to finish their work, and warned that all options were open until the inspectors returned to their duties.
Front-month crude oil futures gained up to 32 cents on the news, touching an intraday high of $14.74 a barrel. But the December contract ran into stiff resistance at those levels, and retreated into negative territory later in the day, settling at $14.36 a barrel, down six cents.
"It's going to take a while to improve these fundamentals," Tashnek said.
Although the futures market permits some optimism, cash traders point to less supportive fundamentals, both domestically and on the foreign side.
Imported crude continues to be amply offered into U.S. markets, as traders point to several players offering North Sea Brent into the Gulf Coast.
"There is a ton of foreign crude coming this way. The arbitrage is so wide open, it looks like the Grand Canyon," said one cash trader for a major oil company. The arbitrage, which settled at $1.29 on Monday, and is made even more attractive by the relatively cheap price of prompt, or Dated Brent around $1.04 under December Brent.
Light Louisiana Sweet, the main domestic sweet crude, will likely face the sharpest threat from foreign supplies, traders said. LLS weakened by 25 cents to trade at nearly a 40-cent discount to WTI/Cushing last week as a result, then lost several more cents in listless trade on Monday.
In addition to one U.S. refiner's several large vessels carrying Brent, traders were talking about several smaller vessels being fixed by other players. Brent was on offer at around 90 cents under January West Texas Intermediate, Gulf Coast traders said.
Colombia's main sweet, Cusiana, is also weaker, and is valued around $1.55-1.50 under WTI, although details about state oil company Ecopetrol's latest tenders were not available on Monday. Differentials for Cusiana have widened by almost 30 cents since last month.
Cash traders note that sour crudes are also under pressure, especially after last week's news that Chevron's 295,000 barrel per day (bpd) Pascagoula, Miss., refinery will only become fullyoperational at the end of the year. The refinery, which was damaged when Hurricane Georges hit the Gulf Coast in September, runs mostly sour crude, and its problems have eaten into U.S. demand for sour crude.
Venezuela's Mesa/Furrial reportedly traded at $2.65 under WTI last week, having slipped by more than 30 cents in two weeks.
Similarly, Ecuador's sour crude, Oriente is said to be on offer at $2.60 off WTI into the U.S. Gulf, although there is some talk that buyers are as far away as minus $2.80.
The main domestic sour grade, West Texas Sour/Midland has also weakened, and was talked around $1.70 under U.S. benchmark WTI. Last week, WTS was trading around minus $1.48, after Mexico's state oil company Petroleos Mexicanos briefly suspended830,0000 barrels per day of its offshore crude production last week as a precaution against Hurricane Mitch. But the storm has lost much of its strength since then, and traders don't expect any further interruptions to sour crude imports from Mexico.
11/06 04:48 US Products Outlook-Imports, restarts pound prods
NEW YORK, Nov 2 - Bearish pressure from imports and from last week's return of two U.S. refineries from fall turnarounds should dominate oil products this week, traders said.
"You think gasoline is cheap here? The price is desperately cheap in Asia and Europe," said one Gulf trader about the situation cracking open the arbitrage window in the New York Harbor.
While traders said at least 12 cargoes of gasoline were in the water on their way to the New York Harbor, one Gulf trader said six cargoes were fixed to ports all over the U.S. on Monday alone.
Those six included cargoes from Europe, where the Rhine River, a major route to the Rotterdam refining hub, is flooded and partially closed to barges, and a cargo from St. Croix in the U.S. Virgin Islands.
Also adding pressure on products is the fact the scheduled maintenance season is over, with no more major turnarounds on the slate until the spring.
Last week Sun Co. <SUN.N> restarted its 177,000 barrel-per-day (bpd) crude distillation unit at its Philadelphia refinery which was just part of around 430,000 bpd of production to return from maintenance shutdowns that week.
The Sun turnaround came just Tosco's Bayway turnaround, and the two combined helped knock East Coast crude runs to their lowest level in five years.
The low level of crude runs caught some New York traders short last week after a small draw on gasoline brought about in part by short supplies of blending stocks. This week traders said prices should be beaten down.
"Gasoline has been unusually strong with a number of turnarounds in the northeast - I expect it will soften," said one New York trader with a major refining company.
"On the distillates, it is the same type of situation -- there will be a bit more pressure until the we see colder weather," he added.
Distillates in the northeast were supported last week 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.
Now Gulf traders say the additional storing of heating oil in the New York Habor leaves little room for Gulf gasoline to be sold to up North. In addition, adding further pressure, traders said that gasoline storage was high in the Midcontinent trading hub and the Caribbean.
"Nothing looks bullish here all week," said one Gulf trader.
In the Harbor, traders said jet fuel was the only thing looking up, still in short supply from refinery problems in the Gulf. "There is not a whole lot of jet around...there is a lot of demand but very low stocks," said a Northeast trader.
11/06 07:02 FOCUS-Oil down as glut overrides Iraq crisis
LONDON, Nov 6 - Oil markets dropped deeper into the mire on Friday,
extending a slide that has taken prices back to within sight of 10-year lows.
Benchmark Brent was down three cents by 1130 GMT at $12.47, less than a dollar up from this August's nadir, as a stubborn supply glut allows oil traders to take a relaxed stance over key producer Iraq's brewing crisis with the United Nations.
Prices are nearly $7 below last year's average despite the threat posed by U.S. President Bill Clinton's latest warning of potential military action to Iraq's near two million barrels per day (bpd ) crude exports.
Clinton called Iraq's latest defiance of U.N. resolutions ''totally unacceptable,'' telling Baghdad that it must comply immediately and that military force was an option.
Clinton's warning came after the U.N. Security Council's unanimous 15-0 vote on Thursday condemning Iraq's decision to stop cooperating with U.N. weapons inspectors.
The Security Council resolution did not raise the threat of force if Iraq failed to comply. But the U.S. and Britain have said they already have the authority to do whatever is needed to force Baghdad to stop blocking U.N. weapons inspectors.
U.S. Defense Secretary William Cohen, on a trip to the Middle East and Europe to drum up support against Iraq, said Gulf Arab states were ''united in their condemnation'' of Saddam's latest defiance.
Yet oil traders believe military action would only cut Iraq's exports under the U.N-sponsored ''oil-for-food'' programme in the unlikely event that oil facilities are directly targeted.
Fears of supply disruption are further blunted by a huge stock surplus that has besieged prices this year, thwarting a three million bpd producer cut package.
Latest statistics from the American Petroleum Institute, a leading indicator of trends in the world's biggest oil market, showed a near eight million barrel leap in crude stocks, the fourth straight weekly rise in already bloated inventories.
The supply excess has overshadowed severe disruptions to output for nearly a month from Africa's biggest producer, Nigeria, as militant Ijaw youths demand improved amenities and more access to power for people from the oil-producing areas.
Analysts say producers must now cross their fingers for a long, hard northern hemisphere winter to ease swollen stocks.
PREOPENING N.Y. ENERGY COMMENTS
N.Y. ENERGY FUTURES CALLED STEADY-LOWER; REBOUND POSSIBLE
Fri, 6 Nov 1998 09:16 EST - Part 1
--Crude oil is called to open steady to down 10 cents
--Heating oil futures are called steady to 25 points lower
--Unleaded gas futures are called steady to 25 points lower
New York-Nov. 6-FWN--CRUDE OIL AND PRODUCT FUTURES ARE expected to come in this morning on the defensive and continue to test key underlying support marked by last week's lows, traders agreed.
Key support on a closing basis is seen at $13.86 in December crude oil futures, 42.85 cents in December unleaded gasoline and 38.55 cents in December heating oil futures.
December unleaded gasoline already closed under last week's low on Thursday and pushed down to test the October low at 41.70 cents overnight on ACCESS, hitting a low of 42 cents before bouncing back in very light trading of just 230 contracts.
However, reports this morning that the United States is ready to attack Iraq as early as next week could put a firm floor under prices and limit new selling interest, traders noted.
Iraq rejected a new U.N. Security Council resolution which condemned its obstruction of arms inspections. Iraqi officials indicated they have no plans to rescind the decision to stop cooperation with arms inspection until the U.N. seriously considered an examination of lifting trade sanctions in place since Iraq's invasion of Kuwait in 1990.
President Bill Clinton, calling Iraq's latest defiance of U.N. resolutions totally unacceptable, warned Baghdad Thursday that it must comply immediately and that military force remains an open option.
Both U.S. and British officials have noted this week that they already have the authority to do whatever is necessary to force Iraq to stop blocking U.N. weapons inspectors.
U.S. Defense Secretary William Cohen has been on a trip through the Middle East this week to garner support for Washington's hard-line stance with Iraq. Traders have described Cohen's mission as less than enthusiastic.
One trader noted that he was expecting some early weakness in the energy markets this morning, but some short covering could develop before the weekend after dropping the first four days of the week and dropping back down into key areas of support that have produced upward bounces in the recent past. "Every time we dropped back below $14.00 (in December crude oil futures in recent weeks) it doesn't stay down there very long," he said.
He said the Iraqi situation could be another catalyst for some short covering today.
Part 2
Technically, December crude oil will find support today $13.80, $13.20, $13.00 and $12.56 with resistance seen at $14.26, $14.58, $14.81 and $15.11. December heating oil support is seen at 38.55, 38.30 and 36 cents with resistance at 39.70, 40.75, 41.10, 41.85 and 43.30 cents. December unleaded gasoline support is at 42.00, 41.70, 41.00 and 40 cents with resistance seen at 43.55, 44.10, 44.80, 45.20 and 47.80 cents.
In NYMEX ACCESS trading, December crude oil futures traded in a range of $13.99 to $13.83 and was last down 8 cents at $13.89. December heating oil was down 10 points at 39 cents in a range of 39.10 to 38.80 cents. December unleaded gasoline was down 10 points at 42.70 cents on ACCESS after trading in a range of 42.80 to 42 cents overnight.
Overseas this morning, December Brent crude oil futures are down 2 cents at $12.48 and December gas oil futures are down $1.75 at $115.25.
N.Y. NATURAL GAS FUTURES CALLED WEAKER ON PROFIT TAKING
09:44 EST New York-Nov. 6 Nov-FWN--NATURAL GAS FUTURES ARE SEEN opening down 2 cents to 3 cents here this morning.
In over-the-counter trading, December natural gas is bid at $2.520 and offered at $2.530 compared to a 15.8-cent gain to close at $2.553 Thursday.
The market soared Thursday and could be due for profit taking, traders said.
"This market is still good even if we move back down toward $2.470 (in December futures)," one broker noted. He said that given the surge of over 30 cents this week, some profit taking should emerge before the weekend.
But the focus has clearly shifted this week from one of worries about large stocks of gas to close the injection season, to worries that a cold winter weather will justify a big stocks situation this early in the heating season.
Cold temperatures will continue to dominate much of the nation this weekend. Coldest regions are expected to be the Plains states and Midwest. Next week the first major snow storm could bring a chance for significant snow over the central United States by the middle of next week.
However, some traders noted that weather forecasts for next week are moderating a touch. In addition, the trade said the talk of arctic air is a little premature with Thursday's surge in prices. While temperatures will be below normal, they will only be slightly below freezing. This should not be a strong reason to sustain prices at current levels given the surplus of gas already in storage, sources noted.
But bulls said the key right now is that no one wants to use storage stocks, and as long as utility companies focus on spot market purchases to meet immediate needs the cash market should continue to hold a firm tone and thus support futures.
Traders were also encouraged by the move December futures made above the February futures this week. That's an indication of real demand, one trader noted.
Technical support for December natural gas futures is seen at $2.530, $2.475, $2.41, $2.35 and $2.24 with resistance seen at $2.580, $2.630, $2.710 and $2.800
Overnight trading on ACCESS in natural gas futures witnessed December futures trading between $2.555 to $2.523 and was last down 0.5 cent at $2.548.
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