CRUDE OIL / Market Wrap Ending Thursday 12/3/98
12/03 16:06 World oil prices tumble again as bears prowl
LONDON, Dec 3 - Sickly oil prices slid on Thursday in a demonstration of trader concern about fraying OPEC output discipline and its potential to stoke global oversupply.
Benchmark Brent blend crude futures for January delivery settled 18 cents lower at $10.18 a barrel, not far off a fresh low of $10.06 struck on Tuesday.
The contract had traded some 30 to 40 cents higher for most of the session but a late bout of profit-taking in U.S. oil markets and reports of OPEC production increases spurred a wave of selling in London.
The research arm of Dresdner Kleinwort Benson bank in London said it expected output by the Organisation of the Petroleum Exporting Countries to have gained by 500,000 bpd in November to 27.5 million bpd after falling slightly in October.
"If our estimate of a rebound in OPEC output proves true, prices could dip further in the near term," it said.
The bank added it had lowered its average 1998 Brent price forecast to $13.00 a barrel from $13.30 in view of poor supply/demand fundamentals. It also cut its 1999 Brent forecast to $13.00 from $15.00.
"Short of a miraculously cold first quarter which might add 0.5 million barrels per day to demand, there is little prospect of any meaningful increase in oil prices before March," said the bank's latest oil and gas bulletin.
An OPEC output increase would damage compliance with some 2.6 million bpd of cuts the producer club has agreed this year to try to stem prices languishing around 12 year lows.
On Tuesday Brent hit a low of $10.06, the grade's lowest since the Brent cash market dipped below $9 in 1986. Oil on average this year, at around $13.60 for Brent, is lower than at any time since 1976.
There was little apparent help from remarks by OPEC Secretary General Rilwanu Lukman who said the cartel would be prepared to make more output cuts if oil prices did not recover.
"We must give the production cuts more time to make an impact on the market," Lukman told the London-based Arabic daily Al-Hayat in an interview. "If it appears that prices do not move to better levels, the members of our organisation are ready to make additional cuts to improve prices." OPEC President Youssef Yousfi also said he would step up consultation with members of the crude oil exporting group to try to stem the slide in oil prices.
OPEC is expected to meet again in March to consider options that may include output cuts. The cartel met in Vienna last week but took no action to rescue prices.
Markets are smothered by an enormous stock overhang created by a demand collapse in Asia, an unusually warm 1997-98 winter, rising Iraqi exports, a lifting of OPEC's output ceiling a year ago and, more recently, a Russian export drive.
12/03 16:48 NYMEX crude ends off, heat oil up in choppy day
NEW YORK, Dec 3 - January crude oil futures went on a roller-coaster ride in late trading Thursday before ending with a small loss as profit-takers pounded the contract in the closing minutes, traders said.
"The market was continuing to consolidate until late when the profit-takers barged in," said a NYMEX floor trader.
At 1455 EST/1950 GMT, January crude traded 18 cents up at $11.42. But at the closing minute, the front month fell to $11.15, down nine cents, before settling at $11.19, down five cents.
In the volatile session, the contract earlier breached the early low of $11.32 and set session lows of $11.20 and then $11.15. In the morning, the contract traded as high as $11.65.
January heating oil ended at 32.42 cents a gallon, up 0.14 cent, one bright spot in the day's choppy trading. The contract trimmed earlier gains of as much as 0.97 cent, when it hit 33.25 cents. It dipped to a session low of 32.35 cents late.
January gasoline lost 0.12 cent, ending at 34.51 cents a gallon. The contract, moving with crude, reversed from a gain of 0.27 cent at 34.80 cents near the close. In the morning, it traded as high as 35.50 cents.
January crude futures failed to breach resistance above $11.65 just past midday and began creeping down after that. A short-covering rally lifted it back up late when profit-takers saw their chance and took it, traders said.
Some traders said heating oil's advance stemmed from forecasts of cooler weather ahead, particularl one that saw a cooling trend into late December associated with a Siberian air mass.
But some analysts doubted the advance could be sustained, noting most forecasts spoke of cooler temperatures next week from the current warmer-than-normal weather.
Besides, heating oil stocks are bulging "and the problem is where to put them," said Tom Mooney, an analyst at Houston-based Southeast Energy.
Traders continued to belabor the failure of the Organization of Petroleum Exporting Countries (OPEC) to take steps last week to support prices, which fell to 12-year lows on Monday.
OPEC Secretary-General Rilwanu Lukman was quoted on Thursday as saying OPEC members that "if it appears that prices do not move to better levels, the members of the organization are ready to make additional cuts to improve prices."
NYMEX traders dismissed Lukman's statement as mere rhetoric.
12/04 01:31 U.S. Prods Outlook-High temps to melt heating oil
NEW YORK, Nov 30 - U.S. heating oil prices are due for a meltdown this week as high stocks face unusually warm winter weather forecasts, analaysts and traders said Monday.
"The mild weather is not going to help...stocks don't look like they are going to be drawn down," one Gulf Coast trader said.
Other traders were sceptical that the futures heating oil screen could go any lower than depths it trod at Monday.
January heating oil on the New York Mercantile Exchange (NYMEX) lost 2.20 cents per gallon on Monday to close at 32.13 cents.
Meanwhile, gasoline also looked bearish with Exxon's <XON.N> Baton Rouge refinery beginning to emerge from its six week planned maintenance last week, although the 186,000 barrel per day (bpd) crude unit remains out of service with no estimated date of return, traders said.
"It's really bad on gasoline..the losses on the NYMEX were gasoline led," said one New York trader. On Monday, January gasoline on the NYMEX shed 2.10 cents to settle at 34.09 cents a gallon.
"We'll see how it goes on the new contract, but there is the glut and until people dump more distillates for the gasoline (storage), it will stay down," the trader said.
In the Northeast, the major heating oil consuming hub, unseasonably warm weather of the last few weeks was expected to continue. Temperatures were expected to be 10 to 15 degrees Fahrenheit above normal and eight to 12 degrees above normal on Friday, according to the Weather Services Corp on Monday.
Temperatures in the Mid-Atlantic were expected to be 15-20 degrees above normal Tuesday and 10-18 degrees above normal for the rest of the week.
"Make no mistake about it, the early winter weather is the most critical to prices," said an analyst in the Gulf.
"If we don't get the cold early and if refineries are running hard to meet a cold winter demand, there is less and less of a chance of any true shortage late in the winter no matter how cold it gets," he added.
"Heating oil in the Harbor is at historically unprecedented 30 cents with temperatures in the Northeast close to 70 degrees..the extended forecast shows that there is not much change for the region or for the rest of the country."
"It is not a constructive picture for heating oil or for natural gas. The only answer is for run cuts, but that will back out crude into the market. It is not just a problem with U.S. demand but a world wide demand issue."
Meanwhile, New York Harbor heating oil inventories were more than 6.3 million barrels higher than last year for the week ending November 20, according to last week's American Petroleum Institute (API) statistics, traders said.
And while Gulf Coast heating oil stocks are actually lower on a year-to-year basis, last week they rose about 345,000 barrels according to the API, in part because of the recent freezing of nominations on the Colonial Pipeline, traders said.
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