IN THE NEWS / Crude Oil Markets (1)
Column Contents Index
12/09 15:59 World Oil dips despite extended Gulf output curb
12/09 16:36 NYMEX oil, products end down on oversupply worries
12/09 16:38 U.S. foreign crudes - Bids on Cusiana cargoes due
12/09 17:00 North Sea Brent up(not down)in US trade
12/09 17:13 U.S. cash crude oils dip on benchmark WTI
12/09 17:45 White Christmas hope melts for heating oil market
12/09 17:47 U.S. Cash Product-USG bid up, wipes out NYMEX loss
12/09 20:50 U.S West Coast pure ANS prices, but diffs steady
12/09 15:59 World Oil dips despite extended Gulf output curb
LONDON, Dec 9 - Oil prices dipped to near historic lows at the close on Wednesday despite a pledge by Gulf Arab states to extend measures already in place against a global supply glut.
International benchmark Brent crude, which showed some early gains that took it to $10.33 a barrel, ended the day 10 cents lower at $10.01 after briefly dipping into the single digits minutes before the close.
It was the second time this week that London oil futures fall below $10.00 a barrel this week.
The slump in oil values both sides of the Atlantic came after remarks by Venezuelan President-elect Hugo Chavez that he did not foresee new oil production cuts.
"The Venezuela headlines pushed us back into the real world of the fundamentals plagued by oversupply," one IPE broker said.
"I think really that all the rallies we're seeing are technical rallies following some headlines but the fundamentals keep pushing us lower," he added. Chavez, who was speaking to journalists after meeting President Rafael Caldera, said however that he would respect the existing agreements to limit global crude output.
Sentiment was dampened further late in the day by remarks from Iraqi Oil Minister Amir Mohammed Rasheed who said Baghdad hoped to raise oil production next year to three million barrels per day with exports of about 2.3 million bpd provided the country received oil industry spare parts.
"Next year we hope to increase production to three million barrels per day, allowing us to export 2.3 million barrels per day," Rasheed said.
An early boost in crude prices followed the Gulf Cooperation Council (GCC)'s agreement on Wednesday to prolong current oil supply curbs by six months to the end of next year.
"The higher council agreed to extend work with production cuts pledged by its states until the end of 1999," a communique said from the group which includes OPEC members Saudi Arabia, Kuwait, the United Arab Emirates and Qatar as well as non-OPEC producers Oman and Bahrain.
Added price support came early on from a renewed flare-up between Iraq and U.N. weapons inspectors, helping to offset news of a big build in heating oil stocks in the key United States market.
The GCC pledge signalled an improvement in producer harmony after oil cartel OPEC's failure late last month to extend its 2.6 million barrel per day (bpd) cut package sent prices spinning into single digits.
Any hopes that fresh output cuts might emerge from the summit foundered as key producers insisted that adherence to existing curbs must come first.
"If we witness full compliance with the cuts that we (have) agreed upon, I think we are in a position to take further measures," said Kuwaiti oil minister Sheikh Saud Nasser al-Sabah.
Sheikh Saud, a strong advocate of deeper output cuts, added that the price crash justified holding an extraordinary OPEC meeting before the cartel's next scheduled session in March.
But he made it clear that Gulf Arab states would not act independently of OPEC. "We're not willing to sacrifice our market share for the sake of others," he said.
Rising tensions between old OPEC adversaries Saudi Arabia, Venezuela and Iran over market share had prevented the group agreeing even a simple cut extension last month.
Yet Saudi Arabia's Crown Prince Abdullah earlier this week called for renewed efforts to arrest the price slide. And Iran on Wednesday said it was ready to take further measures with other OPEC countries.
Sellers sentiment got a further boost early in the day after U.N. arms inspectors were prevented from carrying out what Iraq called a "provocative" inspection of a headquarters of President Saddam Hussein's ruling Ba'ath Party.
"If UNSCOM cannot do its job effectively, we remain poised to act," said White House spokesman David Leavy.
In Paris, U.S. Secretary of State Madeleine Albright said the time for diplomacy was over and the threat of air raids against Iraq was still on.
The scale of producers' price problems was underlined by a sharp build in U.S. heating oil supplies, spurred by unusually warm December temperatures across much of the U.S. east coast.
12/09 16:36 NYMEX oil, products end down on oversupply worries
NEW YORK, Dec 9 - Crude oil and refined products settled lower Wednesday as bearish sentiment over brimming supplies and a slew of bearish news kept buyers to the sidelines, traders said.
"The market is edgy. Not even bullish news could move it up because there's just too much oil around," said a NYMEX floor trader.
At the closing minute, January crude futures last traded at at $11.13, a barrel, down 17 cents. It settled at $11.16, moving down 14 cents on market-on-close orders. The contract traded as high as $11.46. But in the afternoon, it touched the day's low at 11.12.
January heating oil ended at 32.17 cents a gallon, down 35 cents. It traded between 32.00/32.90 cents a gallon.
Front-month gasoline finished at 34.49 cents a gallon, down 0.22 cent, bearish for most of the day as it traded between 34.10/34.80 cents.
In London, January Brent crude on the International Petroleum Exchange once again moved below $10, trading at $9.96 toward the closing minutes before edging up at the close to $10.01, down 13 cents from Tuesday.
The latest U.S. weekly inventory data showed another build in refined products amid low demand while traders considered a stock draw in crude not sufficient to push prices up, traders said.
A statement by Venezuelan President-elect Hugo Chavez that he foresees no further production cuts, but that his country would stick to current production-cut agreements added to bearish sentiment, traders said. These developments overshadowed bullish news, including fresh tensions involving Iraq and United Nations arms inspectors and a comment by the Kuwait oil minister that the current depressed prices justify a meeting of the Organization of Petroleum Exporting Countries before its spring summit in March.
A pledge by Gulf Arab states to extend output cuts if other producers followed suit was also seen as creating some optimism, but failed to stem the day's slide.
"OPEC's production continues to be high and their last winter meeting underlined the fact that some of them were cheating," said a NYMEX trader, who added that the glut can't be reduced until all participants in this year's output-cut agreements stuck to their pledges.
OPEC agreed to reduce output by 2.6 million barrels per day (bpd) under output-cut agreements with non-OPEC producers, which contributed additional cuts of 500,000 bpd.
But the effort to help lift oil prices largely failed because some OPEC members continued to overproduce, analysts said. Depressed demand from financially troubled Asian countries as well as slower growth in some industrialized countries have continued to block any price recovery, they said.
12/09 16:38 U.S. foreign crudes - Bids on Cusiana cargoes due
NEW YORK, Dec 9 - The U.S. market for imported crudes was mostly steady on Wednesday, but traders said they were waiting for details on the latest sell-tender for Colombia's light, sweet Cusiana crude.
New York crude oil futures came under pressure on Wednesday from newly elected Venezuelan President Hugo Chavez' comments that he did not expect further production cuts. Chavez' comments overshadowed the market's optimism about a meeting of Arab Gulf producers, where members had pledged to extend production cuts till the end of 1999.
"It's a pretty sensitive market," one trader said.
Front-month January crude on the New York Mercantile Exchange settled at $11.16 a barrel, down 14 cents.
LATAM - COLOMBIA, VENEZUELA, ECUADOR, CHILE
-- Bids were due on Wednesday for four cargoes of Colombia's Cusiana crude, scheduled to load in late January. Most players said they expect Cusiana will not change much from its current differentials of $1.30-1.25 under West Texas Intermediate, where state-owned oil company Ecopetrol awarded three early January-loading cargoes last week.
At least three other January-loading cargoes are also said to be on offer in the U.S. Gulf, traders said.
-- Details of the last deal, and even talk about Colombia's medium-heavy Cano Limon was scarce in the U.S. market. Traders were still in the dark about Ecopetrol's December 31-January 6 loading cargo of medium heavy Cano Limon, for which bids were due last week.
Cano was valued in a very wide range, between $2.80 and $2.45 under WTI, as many traders said they were hard pressed to put a price on the grade.
Loadings of the grade have been severely disrupted this year, with talk of delays of at least one week. Last week, the pipeline connecting the Cano Limon field to the Caribbean loading port of Covenas was shut after storage facilities at the port were filled, exacerbating lifting delays. Most disruptions to the pipeline have been from guerrilla bombings, however, which totaled a record 74 attacks this year.
-- Details were equally scarce about Ecopetrol's January 4-8 loading cargo of medium-heavy Vasconia, for which bids were due last Thursday. Vasconia was last heard done at a discount of $2.85 under WTI, when a December cargo was sold to a U.S. refiner.
-- Venezuela's sour crude, Mesa/Furrial remained valued around $2.80-2.70 under WTI, traders said.
"It's the same thing as always. If you want it, they have it," one trader said of Mesa.
-- Ecuador's sour crude Oriente remained valued around the $3.00 level below U.S. benchmark WTI, traders said. There is still little news from Ecuador about several term cargoes for Oriente that are scheduled to expire at the end of this year, traders said. Last week, the heads of state owned Petroecuador and Ecuador's Energy Minister were traveling through the United States, trying to convince U.S. refineries to enter into contracts directly with Petroecuador, rather than relying on trading companies to supply them with Oriente. But it is still unclear if Petroecuador's new marketing strategy will work.
-- Traders also said they were waiting for news of Chilean state-owned oil company ENAP's buy-tender for a million barrels of crude, for delivery in mid-January. Bids were due last week. In the past, Chile has bought Ecuadorean Oriente, Nigerian Forcados and Malaysian Tapis to fill its buy-tender.
NORTH SEA, WEST AFRICAN
-- The January WTI-Brent arbitrage remained mostly steady on Wednesday, settling at $1.15 a barrel. At these levels, the arb is not wide enough for U.S. markets to attract large volumes of North Sea crudes, traders said, even though prices of prompt, or Dated North Sea Brent remain relatively cheap at 64 cents under January Brent.
-- North Sea Brent was said to be on offer in U.S. markets at about 35 cents under WTI, which buyers said was quite expensive for the grade. West African crudes are still being offered into the U.S. Gulf, and traders said that more might be heading to U.S. markets in the coming week, as Asian demand tapers off.
IRAQI
-- Iraqi sour crude, Basrah Light was said to be on offer at around $2.50 under WTI on a delivered basis, traders said.
12/09 17:00 North Sea Brent up(not down)in US trade
NEW YORK, Dec 9 - North Sea Brent rose a cent in sluggish U.S. trade late Wednesday, dealers said.
January Brent was pegged at $10.02 a barrel, compared with a close of $10.01 on the International Petroleum Exchange earlier Wednesday.
Dealers said trade in the aftermarket included 250 lots of January cash Brent partial cargoes at $10.05, 100 lots at $10.00, 100 lots at $10.01, and another 150 lots at $9.98 a barrel.
Also, the Brent January-February spread traded twice at minus 26 cents and once at minus 25 cents in Wednesday's aftermarket.
12/09 17:13 U.S. cash crude oils dip on benchmark WTI
NEW YORK, Dec 9 - U.S. cash crude prices dipped on Wednesday in line with the benchmark West Texas Intermediate/Cushing, which was driven by the 14-cent drop in the value of the January crude oil contract on the New York Mercantile Exchange.
Differentials to the WTI/Cushing benchmark for individual cash crudes were largely unchanged on Wednesday.
Futures traders and their cash colleagues seemed little affected by the latest weekly inventory data or an agreement by Gulf Arab states to extend oil production cuts.
And ARCO said on Wednesday that the Seaway Pipeline that carries crude from Freeport, Texas to Cushing, Oklahoma is fully nominated for January. This is the seventh consecutive month that the 550-mile pipeline is moving crude at capacity.
The U.S. cash crude benchmark, West Texas Intermediate, dipped to under $11.20 a barrel by the end of the day. It settled just at $11.18/$11.20 after the NYMEX closed on Wednesday.
The January contract on the NYMEX settled down 14 cents at $11.16 per barrel. The February contract was down 11 cents to $11.57 per barrel, leaving the January/February roll at minus 41 cents.
West Texas Intermediate/Cushing postings plus was done as high as $2.18 early in the day but the last deal done was $2.10 per barrel.
Light Louisiana Sweet/St. James, which over the last few days has found support from indications that the arbitrage to bring competing crude over from Europe has closed, was assessed between nine and six cents under the benchmark. LLS was done at minus 10/9/8/7/6 cents to WTI/Cushing.
Its sister grade, Heavy Louisiana Sweet/Empire, was placed between minus 20 and 15 cents a barrel after changing hands at discounts of 20, 17 and 15 cents on Tuesday.
West Texas Sour/Midland was discussed between minus $1.35 and $1.32 a barrel, and done at -$1.34/1.33/1.32. West Texas Intermediate/Midland was camped between 35 and 31 cents under WTI/Cushing. WTI/Midland was done at minus 33 cents.
Eugene Island was done at minus $1.14 and $1.10 to WTI/Cushing.
U.S. cash crude traders appeared to shrug off American Petroleum Institute figures released Tuesday which showed a 2.8 million barrel decline in crude stocks. Both traders and analysts said whatever strength the dip in crude stocks would normally lend the market was tempered by a sharp rise in crude imports and heating oil supplies.
Crude traders also seemed unimpressed by an announcement from the Gulf Arab states early Wednesday that they agreed to extend production cuts until the end of next year.
The agreement came in the wake of OPEC's failure late last month to take any measure to arrest the long fall in world oil prices, and complaints that the oil cartel is producing well above promised levels.
"You've got to have compliance before getting too excited about an extension," one cash crude trader said of the agreement by the Gulf Arab states.
12/09 17:45 White Christmas hope melts for heating oil market
NEW YORK, Dec 9 - Heating oil sellers in the U.S. may be dreaming of a white Christmas to rescue dismal prices that are around 40 percent lower than a year ago after unseasonably warm weather and record fuel stocks.
But weather watchers say the drop in the mercury will remain just a dream at least until the New Year as they revise earlier forecasts of a reversal in the warmer-than-usual winter temperatures.
"There were some signs that it would change in the middle of the month, but looking at signs now, there is no clear indication of a reversal from the milder-than-normal temperature patterns in the eastern half of the U.S.," said Mike Palmerino, senior meteorologist at Weather Services Corp. (WSC), of Lexington, Mass.
Palmerino added that the WSC still holds out the potential for colder weather to move into the Midwestern and Northeastern states in early January to February.
"But if you can't generate (heating) demand now, it will be very difficult to gain usage back, even if temperatures do turn colder because you would have lost a lot of the heating season," Palmerino said.
This season so far has been disappointing for the Northeast, the region most dependent on heating oil during winter.
The weather, as measured by heating degree-days, was approximately 20 percent warmer than normal in New York City and 11 percent above normal in Boston, said Dave Taylor, the WSC's chief climatologist.
"It has been much, much warmer this year," said Taylor, adding temperatures so far were around 22 percent warmer than last year.
But last winter and the winter before that were both disappointingly warm years for the heating oil markets, adding to the doldrums of the Asian economic crisis, which have brought brought the whole oil complex down to record 12-year lows.
In addition to the overhang of two warm winters, the market this year faced high rates of fresh supplies as domestic refiners, themselves swamped with the cheap but high crude stocks, are ramping up production.
"With crude tanks near full and end-of-year tax concerns, refinery runs are likely to stay high through the end of December," an analyst said.
Heating oil prices in the Northeast oil trading hub in New York Harbor have dropped over 40 percent from a year ago to just above 30 cents per gallon. Half of those losses occurred only within the last two months, as stocks reached storage tank tops and the mercury failed to drop.
"This fourth quarter is warmer than last year's and retail volumes should be lower. Demand is really driven by the weather...it is always disappointing if it is not freezing cold. But we are expecting better weather," said a senior company official at Petroleum Heat and Power Co., the largest U.S. retail distributor of home heating oil, mainly in the Northeastern and Mid-Atlantic states.
Temperatures this week slipped down to more seasonal lows but traders in the wholesale heating oil market, including refiners who count on the product to drive their refining profits during the winter, said much lower and sustained temperatures were needed to muster enough demand to soak up some of the inventory in the brimming fuel tanks.
"As far as the weather is concerned, it has to get cold and stay cold. There is not enough of a weather situation to make a difference to prices...we have to get into a deep winter," said a trader.
High sulphur heating oil stocks, which have been building since April, last week climbed 870,000 barrels to their highest levels in at least 10 years, to reach nearly 54 million barrels, or a hefty 12 million barrels higher than a year ago, the American Petroleum Institute (API) said on Tuesday.
The surplus has also started to back up in the country's refining hub on the coast of the Gulf of Mexico, with stocks there climbing by nearly 1.0 million barrels, according to the API data.
"Heating oil stocks are still near tank tops, and sounding suddenly unmanageable," an analyst said. "Where to go with it? It better get cold quick!"
12/09 17:47 U.S. Cash Product-USG bid up, wipes out NYMEX loss
NEW YORK, Dec 9 - U.S. Gulf Coast gasoline and distillates cash differentials were bid up late Wednesday, wiping out the NYMEX losses and ignoring the bearish stock data, traders said.
According to the American Petroleum Institute (API) weekly stock data, gasoline output in the Gulf Coast last week rose by over a million barrels to an at least 10 year record high of 3.7 million barrels.
"It seems that the APIs are bogus because they say output is up to a record high, yet differentials have been rising before they came out," a trader said.
"The Gulf has been furious this afternoon...there has been better buying than selling and you can't get more fundamental than that," he added.
Gulf Coast distillates were also bid up, wiping out the losses on the NYMEX which slipped as bearish sentiment over brimming supplies and a slew of bearish news kept buyers to the sidelines, traders said.
January heating oil ended at 32.17 cents a gallon, down 0.35 cents while front-month gasoline finished at 34.49 cents a gallon, down 0.22 cent.
January crude settled at $11.16, moving down 14 cents on market on close orders
GULF COAST
Better bids on both gasoline and distillate differentials, 0.25 to 0.75 cent firmer, erased much of the NYMEX losses, traders said.
Conventional regular M5 gasoline traded 0.75 cent firmer at a 5.00 cents discount on the now prompt back 35 cycle, while premium conventional V4 was also firmer on a cut in production amid weak economics, also moved up in line to trade at 3.00 cents over the M5.
Jet fuel was 0.25-0.50 cent higher ignoring the crunch in the northeast, trading at 2.00 cents below the NYMEX on the 54-grade's back 35 cycle, with the back 36 pegged at 1.75 cent.
Prompt 55-grade was at a 1.35/1.25 cent discount.
Prompt heating oil also ended the day 0.25-0.50 cent firmer at 3.25/3.00 cents discount ahead of its scheduling on its front 35 cycle with but the back 35 and 36 assessed flat.
Low sulphur diesel edged up a quarter cent to 2.25 cents discount and the anys at 2.10/2.00 cents.
NEW YORK HARBOR
Jet fuel differentials held losses Wednesday afternoon as barrels drawn to the hub from the Gulf over the last few weeks turned the hub into a puddle, traders said.
Jet 54-grade was pegged at merc level to 0.50 cent over the heating oil screen.
Heating oil also held losses, about 0.40 cent worth, to 1.30/1.15 cents for barge barrels and 1.10/0.90 cent for line barrels.
Heat slipped about a penny Tuesday as Sunoco raised its posting price for heat several times during the day, traders said.
Reformulated regular gasoline held penny gains on fewer cargoes coming to the hub, traders said.
Prompt reformulated regular A5 grade gasoline was pegged at 1.50/1.25 discount to the screen. Premium reformulated D-grade was also bullish, pegged at 1.00/0.75 cent under the screen.
Conventional M-grade gasoline was steady pegged at 5.00/4.75 discount to the screen.
Regular premium V-grade was also steady, pegged at 4.30/3.85 cents discount.
MIDCONTINENT
Chicago and Group Three were slightly better bid in extremely quiet trade.
Gasoline eeked higher in both hubs though few deals were heard done.
Chicago gasoline was pegged 5.00/4.75, while Group Three gasoline was pegged 4.75/4.25 cents higher.
"There are just no buyers in a thin market," a trader said.
Prompt jet fuel was pegged at 0.25 cent under the screen after it traded at that level late Tuesday, traders said.
Low sulphur diesel in Chicago was at a penny discount while gasoline in the hub was pegged steady at 5.00/4.75 cents.
Group low sulphur diesel was pegged a shade stronger at 0.75/0.50 cent under, and jet fuel at 2.50.
Premium gasoline in both hubs were assessed at a 2.50 cent regrade over the regular grade.
12/09 20:50 U.S West Coast pure ANS prices, but diffs steady
LOS ANGELES, Dec 9 - Outright prices for U.S. West Coast spot crude oil fell Wednesday while differentials held flat in a quiet market, traders said.
The last reported deal occurred December 3, when a cargo of benchmark Alaska North Slope (ANS) sold for $2.10 a barrel under January West Texas Intermediate (WTI).
ANS markets have been driven lower by steady production, falling refinery demand, and broadly lower oil markets, traders said. Few deals were expected soon, with traders trying to reduce inventories and producers wary of selling into a weak market.
Some buyers said West Coast demand for spot ANS would be thin for January, especially since a key buyer -- Equilon's Washington State refinery -- was unable to take its usual two to three cargoes of ANS following a explosion that cut plant capacity.
BP Oil, the leading seller of ANS, offered cargoes for $1.40 a barrel under WTI.
Outright prices for January ANS on the West Coast fell to $9.01/9.19 a barrel from $9.13/9.32 on Wednesday.
Traders said California heavy grades remained steady, but that demand could strengthen.
Two major producers, Chevron and Texaco, may buy spot heavies to complete line fill on the Pacific Pipeline, due to begin operation in January.
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