MARKET WRAP -7 / Crude Oil
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12/11 01:54 U.S. Product Outlook-Cool temps eyed to raise heat
12/11 02:13 Oil prices recover slightly in Asia
12/11 01:54 U.S. Product Outlook-Cool temps eyed to raise heat
12/11 01:54 U.S. Product Outlook-Cool temps eyed to raise heat
NEW YORK, Dec 7 - All eyes in the U.S. oil products cash market will be on the weather this week, as temperatures are forecast to head back to seasonal lows, and come to the rescue of low heating oil prices, traders said.
"There is no weather...any weather will be a relief," a Gulf Coast market source said.
Heating oil, which is supposed to drive the market during the winter, started with a handicap of record high inventories at the beginning of October.
Although nationwide distillate inventories were 4.0 million barrels away from the peak in the last week of November, they have been on the rise in November to 148.7 million barrels, or 14.2 million higher than a year ago, according to the American Petroleum Institute.
And the industry expected the build to continue, extending the squeeze on storage as the Northeast region -- the winter heating oil consumer hub-- was faced with above normal temperatures.
"If we can finally get some cold weather, we can get demand going," a trader said.
The Weather Services Corp. forecast that this week, "temperatures will be much cooler than in recent days over the Plains, Midwest, and Northeast, averaging near to somewhat below normal overall". High temperatures made heating oil the bear of the barrel last week, melting outright prices in both New York Harbor as well as the country's refining hub on the Gulf Coast, by 1.00 to 1.50 cent per gallon to 28.22 and 30.22 cents respectively. The heating oil cracks on the New York Mercantile Exchange also dipped while refining margins on the Gulf Coast slipped to back below $1.00 in the negative at the close of trade on Friday.
"The NYMEX has bounced back from its lows last week, and will try to trade sideways to higher but it will take substantial rallies to break downtrend," a Gulf Coast trader said.
Crude oil futures in New York and London plunged to 12-year lows last week after the Organization of Petroleum Exporting Countries (OPEC) failed to take supportive steps to shore up depressed oil prices at its winter meeting in Vienna in late November.
"The heating oil and kero markets are the pits - the problem is still much more where to put it than where to find it. This fact is key to the current market for U.S. products," said one analyst.
Gasoline in comparison was slightly supported as some traders sought its barrels for contango storage but was generally dragged down by its own growing surplus of 206 million barrels.
"The market is trying to move higher on the board but there is just plenty of supply," a source said.
12/11 02:13 Oil prices recover slightly in Asia
TOKYO, Dec 11 - Oil prices recovered slightly in Asia on Friday from their overnight slump in New York and London but the rise was seen as only a technical rebound from pre-weekend short-covering.
No fresh supportive news was cited and traders said the rise does not seem backed by any strong upward momentum.
The January futures contract of West Texas Intermediate crude on the New York Mercantile Exchange (NYMEX) last traded on the after-hours ACCESS electronic trading system at $10.81 per barrel as of 0621 GMT, up nine cents from Thursday's floor settlement.
On Thursday, the January contract settled down 44 cents at $10.72, just above the July 1986 low of $10.65, as the United States soft-pedaled on the possibility of immediate military strikes against Iraq over the latest confrontation between Baghdad and the United Nations over arms inspection.
U.S. Defense Secretary William Cohen said on Thursday Washington would wait until after next week to assess the situation following Iraq's refusal to allow full access by U.N. inspectors to the headquarters of the ruling Baath Party.
In London, IPE January Brent crude contract hit a new 12-year low of $9.60 on Thursday before settling a tad higher at $9.64.
On SIMEX on Friday, January Brent was not traded yet as of 0621 GMT, and was bid only at $9.50.
The continued slide in oil prices was exacerbated in late November when OPEC members failed to draw up significant measures to help tighten the market.
But a much-desired fresh output cut by OPEC producers in addition to the 2.6 million barrel-per-day reduction agreed in June could have little effect unless they first fully abide by the already agreed reduction, analysts say.
Also, economists see no quick fix to dwindled global oil demand due to an economic slowdown in many economies.
For Asia, where financial and economic crises have hit hard since July 1997, weak oil prices are not necessarily a boon.
Being a net importer, Asia could have been benefiting from low-priced oil imports. But the situation in some regional economies is far too serious and demand is already too low to enjoy the windfall benefit, said Taiyo Suzuki, senior economist at the Japan Research Institute's Asian study centre.
Japan, the largest importer in the region, will also see little merit. Rather, a deflationary impact is more likely with highly-depressed domestic oil product prices, which would eventually affect overall corporate earnings, analysts said.
"With the (Asian economic) situation as awful as it is, any potentially positive impact will be overshadowed," Suzuki said.
Furthermore, oil producing countries like Indonesia and Malaysia are to experience a more serious revenue fall as oil prices continue to sag, he said.
For Indonesia, especially, which is struggling to overcome its financial crisis, declines in its key revenue source are seen as a hard blow.
12/11 01:54 U.S. Product Outlook-Cool temps eyed to raise heat
LONDON, Dec 11 - World oil producers outside OPEC are showing the first signs of price related production losses in 1998, with output by non-OPEC countries showing near negligible growth for the year.
"This year we have seen the first effects of the low price environment on production," said Mike Wittner of the International Energy Agency in Paris.
"The unfolding story for 1999 will be the lower upstream budgets, and their effect on production. Decline rates in mature fields may be steeper than currently anticipated, and this will be a big wildcard next year," Wittner said.
Total non-OPEC crude output in 1998 will amount to just a half a percent gain over annual 1997 levels, at 40.99 million barrels a day, up 210,000 bpd, a Reuters survey shows.
In 1997, annual non-OPEC production of 40.78 million barrels represented a 2.5 percent gain over year-earlier levels.
Key to the non-OPEC production losses was a 1.5 percent decline in output from the United States, which leads non-OPEC producers, and a more dramatic 8.5 percent slide in output by lead North Sea producer Norway.
Norway's 278,000 bpd production losses, partially a result of its pledge to rein in 100,000 bpd in an effort with OPEC to shore up world oil markets, were also the result of maintenance problems at older fields and delayed start up of new projects.
Fields including Varg, Visund and Asgaard suffered delays.
U.S. Department of Energy officials attribute U.S. declines to a 77,000 bpd slide in natural gas liquids output, as well as a 122,000 bpd slide in Alaskan production. New field developments in the Gulf of Mexico helped buffer the losses.
U.S. and Norwegian declines all but eclipsed impressive gains by other major non-OPEC producers like Britain and Canada, which turned in 5.9 percent and 4.4 percent gains, respectively.
Royal Bank of Scotland figures show Britain's oil production in October was at its highest so far this year.
A year-on-year gain of around 150,000 bpd is largely the due to the November 1997 start-up of the Foinaven field which represted roughly a quarter of production from new fields.
Canadian production of 2.2 million bpd (excluding oil sands) represents a 93,000 bpd gain, mainly from increased recovery factors from existing reserves in the Western Sedimentary Basin.
Oil sands production, which would add an additional 425,000 bpd to Canada's output total, is expected to double by 2020.
Mexico, which also promised price supportive export cuts, showed relatively flat production levels, at 3.43 million bpd.
Countries within the former Soviet territories showed a collective gain of around 50,000 bpd to arrive at 7.25 million bpd in spite of a lacklustre Russian output performance, with Kazakhstan and Uzbekistan registering gains of around four percent and nine percent, respectively.
Chinese oil production of some 3.25 million bpd represents a flat performance for the year, though rising demand continues to boost the country's reliance on imports.
The country suffers from a current crude oil shortfall of roughly 175,000 bpd, according to China's official Business News.
Business News anticipates 1999 production gains of 1.3 percent, though the IEA sees China's crude output around 300,000 bpd lower in the year to come.
Colombia again led the pack in the rapidly growing Latin American region with 16 percent gains stemming in large part from a successful ramp-up of the giant Cusiana-Cupiaga field.
Brazil showed a gain of roughly nine percent.
Late July, state Petrobras posted a record daily production figure of 1.03 million bpd, attributing the increase to an improvement in its facilities installed at the Campos basin and the production start-up at its Voador field.
Production from the largest field at Campos, Roncador, may add another 180,000 bpd next year.
The Reuters survey covers more than 95 percent of the oil pumped by suppliers other than OPEC members and includes natural gas liquids, as well as crude, from most countries. It does not include processing gains, or oil from unconventional crude sources.
Figures for 1998 include projections for December output, and in some cases for November output.
Figures in millions of barrels per day come mostly from national governments. Other sources include oil companies, consultancies, the IEA, and Oxford Institute of Energy Economics.
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