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12/18 18:35 U.S. foreign crude - Wary on Iraq, Cusiana sold
12/19 01:23 US Prods Outlook-The cold won't unleash bulls yet
12/19 05:53 Iran to stick to controversial oil output level
12/19 12:00 Oil Prices Continue To Decline As Bombs Fall
12/20 10:31 Venezuela's Chavez to meet Zedillo for oil talks
12/20 12:41 Oil seen weakening as industry watches Iraq policy
12/20 17:25 Venezuela's Chavez to visit Mexico, oil main topic
12/18 18:35 U.S. foreign crude - Wary on Iraq, Cusiana sold
NEW YORK, Dec 18 - Activity in the U.S. market for imported crudes was quietened by uncertainty surrounding Iraqi crude, but a cargo of Colombia's sweet Cusiana was heard sold on Friday at a private and confidential basis.
The United States and Britain continued their military attacks on Iraq for the third day in a row. Pentagon sources said missiles hit the Basra refinery in southern Iraq, a facility they said provides for the illegal shipment of Iraqi oil.
"It looks like they damaged it pretty badly," said one U.S. trader, but went on to say that the effects of what the Pentagon had termed a "limited attack" were difficult to gauge. "It doesn't look like it affected crude, but I think everybody's waiting for the final word," the trader said.
Crude oil futures markets remained jittery on Friday, moving up briefly on news of the attack on the Basra refinery. But front-month January futures on the New York Mercantile Exchange ended the day eight cents weaker, with a settle at $10.95 a barrel. The January NYMEX contract expires next Monday.
IRAQ
-- The United Nations said on Friday that the flow of crude oil exports from Iraq under the "oil-for-food" plan was as yet unaffected by the Anglo-American bombing campaign. Oil tankers at the Gulf port of Mina al-Bakr and the throughput of the pipeline carrying crude north via Turkey continued more or less along schedule, the U.N. said.
"I think people are keeping a very close eye on Mina al-Bakr," said one trader.
Although some traders said that the global oversupply of crude was such that even if Iraqi shipments were halted, crude markets would see no reprieve from prices near record lows. But other traders disagreed, saying that an extended pause in Iraqi exports would support crude prices.
"Obviously there is (crude oil in) inventory still. The question is potentially how long would (Iraqi exports) stop," the trader said.
January barrels of Basrah Light were heard offered at $2.50 under West Texas Intermediate into the U.S. Gulf earlier this week.
INDIA
-- Traders said Indian Oil Co. awarded three Dubai VLCCs two Gulf of Suez VLCCs and one VLCC of Nigerian Qua Iboe in its latest crude oil tender, traders said on Friday.
"It's not as much Dubai as expected," said one trader.
Another trader noted some surprise about the grade of Nigerian crude that IOC bought.
LATAM - CHILE, COLOMBIA
-- Traders said Chilean state-owned ENAP filled its buy-tender for a million barrels of crude with Ecuadorean Oriente and Nigerian Bonny Light, although traders said details about the price of the grades were still unavailable. ENAP's tender was for crude to be delivered February 5-10. Bids were due on Wednesday.
-- A European major sold a January cargo of Colombian Cusiana at a private and confidential basis on Friday, and continues to offer a second decade January loading cargo of Cusiana at $1.30 under WTI. Another late January cargo was also heard on offer at minus $1.30 earlier this week, and was still unsold as of Friday.
Buyers expressed some doubt at the offered prices, and said Cusiana was closer in value to $1.40 under WTI, where four January cargoes were awarded by state-owned oil company Ecopetrol last week.
-- Details were still unavailable on Colombian state-owned Ecopetrol's sell-tender for a January 9-13 cargo of medium-heavy Vasconia. In the meanwhile, Vasconia remained valued around $2.87 under WTI, where Ecopetrol last awarded a January 4-8 loading cargo of the grade.
-- Colombia's medium-heavy Cano Limon was thinly talked, and was in a wide range between $2.80 and $2.45 under WTI.
-- Venezuela's sour crude, Mesa/Furrial remained valued at $2.80-2.75 under WTI, after a cargo was heard sold at $2.78 late last week.
NORTH SEA, WEST AFRICAN
-- The February trans-Atlantic arbitrage remained steady at$1.26 a barrel on Friday, a relatively wide figure, traders said.
-- With most of the December loading cargoes of West African crudes cleaned up this week, and some traders saying that little was available in early January, talk was mostly notional on West African grades on Friday.
Nigerian Bonny Light was talked in a wide range, with some talk of the grade at parity to Dated Brent, while some buyers reported deals done at discounts to Dated.
A U.S. major sold several cargoes of Nigeria's light sweet Qua Iboe arriving in mid to late January into the U.S. Gulf at $1.30-1.35 over Dated Brent on a delivered basis into the U.S. Gulf this week. Traders said that was equivalent to an fob price of around seven cents over Dated Brent, a relatively strong price for Qua.
Nigerian production was again disrupted by local community protests on Thursday, when five Shell flowstations producing some 50,000 barrels per day of crude were shut in by protesting ethnic Isoko youth. But Shell company sources said they did not expect exports to be affected by the shut-in production. Shell produces just under half of Nigeria's crude two million bpd crude production.
Shell resumed loadings at Forcados on Monday, but declared force majeure to cover days lost to the shutdowns caused by local protests.
In other supportive news, traders said that most January loading cargoes of Angolan grades had already been sold.
Cabinda has recently been sold at discounts of 60 cents under Dated Brent, while Palanca traded at Dated minus 10 cents recently.
12/19 01:23 US Prods Outlook-The cold won't unleash bulls yet
NEW YORK, Dec 14 - Cooler weather finally arrived to the top consuming New York Harbor hub, and colder temperatures were expected in the Midwest, but traders and analysts on Monday said heating oil spikes were unlikely to poke holes through the overhang this week.
While heating oil, crude and gasoline futures gained Monday on news of a planned meeting among oil ministers from Mexico, Venezuela and Saudi Arabia in Madrid on Thursday, products trading was light as buyers were wary of the gains.
Players were more concerned about the temperatures. Weather Services Corporation forecast Monday that temperatures on Tuesday and Wednesday would be four to eight degrees Fahrenheit above normal and two and six degrees above normal through Saturday.
"The big block of cooler than normal air working its way across the U.S. may at least hold bearish sentiment in check," said one analyst.
While better crude oil prices and cooler temperatures may help heat, "stocks may also rise for the next couple of weeks before heating demand typically exceeds production," he said.
Another Gulf trader said, "The market has already built into it heating oil stock gains, so heat probably won't sink either."
Sentiment was bearish on the distillates, with a number of Northeast distillate tanks being freed up, and even a dirty crude tank being converted for gasoline storage, traders said.
On gasoline, traders in all the markets said they were split on the direction of gasoline prices.
On the Gulf Coast "the market is making the same kind of seasonal bottom that heating oil makes in June or July," said an analyst. "The market doesn't move higher because stocks are about to trend down, but rather because the market can't possibly get any further out of favor."
In the New York Harbor, the arbitrage for European cargoes was closed although one European refiner on Monday was trying to sell a U.K. conventional grade cargo into the Harbor, traders said.
"With both arbs closed - from Europe and the Gulf, we should see things get better only in a week and a half's time," said another gasoline trader.
"Conventional gasoline on the Gulf has been relatively tight -- the Gulf Coast differential will have to give up to allow the arb to open to the Harbor or New York Harbor will have to go up," said a Harbor trader.
The Gulf Coast gasoline market was supported, at least at the highest prices since mid November, despite the American Petroleum Institute's (API) record output data last week, as traders were putting the low RVP summer grade gasoline into storage since values for April supplies were around 6.0 cents per gallon higher than the January NYMEX.
"It's a function of the price of butane versus the price of gasoline," said one Gulf Coast trader. "We've done a lot of the summer grade today, players will carry it and sell it to the Gulf," he said.
Gasoline supplies on the API weekly stock report rose more than expected on for the week ending December 4, because of strong refinery production.
Crack spreads firmed slightly on Monday closing at -0.52 cents and compared to -0.73 cents for the last 15 days and -0.68 cent for November.
But one analyst was concerned "that refinery output has been overstated the last couple of weeks and there could be a surprise adjustment at some point."
12/19 05:53 Iran to stick to controversial oil output level
DUBAI, Dec 19 - OPEC power Iran is not expected to change its position on oil production, a bitter dispute blocking fresh moves by the battered cartel to rescue collapsed prices, an Iranian oil source said on Saturday.
"Any new discussions or measures to help the market are all helpful. But as far as Iran's position on its production cut baseline, there is no way this will change," the source, who requested anonymity, told Reuters.
The issue has come under the spotlight following an accord between Saudi Arabia, Venezuela and non-OPEC Mexico at talks in Madrid on Thursday designed to secure Venezuelan compliance with cuts promised earlier this year.
Mexico's Oil Minister Luis Tellez said on Friday after the Madrid meeting that Tehran was key to further progress on countering falling prices and that an Organisation of Petroleum Exporting Countries minister would visit Iran soon to discuss production.
Tellez warned that if Iran sticks to its production baseline of 3.925 million barrels per day (bpd) "it will work against the agreement reached in Madrid."
The deal by the key producers trio, who masterminded two previous rounds of OPEC and non-OPEC supply curbs, has set the stage for new production cuts to battle global oversupply.
The search for further output cuts has become more urgent in a market that remained depressed despite the heaviest U.S. and British military attacks on key producer Iraq since the 1991 Gulf War.
The Madrid deal was a crucial step forward because it obtained the agreement of an incoming Caracas government to remove from the market overproduction of more than 125,000 bpd.
Markets will now focus on Iran to see if the Islamic Republic would be open to compromise that could pave the way for further global production cuts.
Iran wants OPEC to recognise 3.925 million bpd as the basis for its output reduction and any future cuts instead of the 3.623 million bpd judged by the media.
National Iranian Oil Corp statistics showed peak output in March of 3.925 million though February output, the key month used by OPEC as the baseline for this year's output cuts, was lower at 3.795 million.
The Iranian oil source said Tehran was using the March figure because the 3.925 million bpd level in that month came closest to the 3.942 million bpd quota Iran was allocated in an OPEC Jakarta meeting in 1997.
He said Iran was only able to fully benefit from OPEC's 1997 decision to raise its output by 10 percent in March, when its output climbed to 3.925 million bpd after gradual increases.
Harmony between OPEC rivals Saudi Arabia, Venezuela and Iran -- the cartel's giant producers -- is key to any future efforts to improve the oil market.
OPEC kingpin Saudi Arabia, Iran's traditional Gulf rival, has indicated a readiness to reach some sort of compromise with Tehran, the group's second largest producer.
The Iranian oil source said that Iran did not feel "any pressure" and would stick to its own baseline figure.
Iran wants the sensitive issue of oil output quotas assigned after the 1990-1991 Gulf crisis included in discussions on any future production cuts.
"This issue needs to be in the debate," the oil source said. "The issue of Iraqi supplies needs to be discussed."
OPEC producers boosted production during the 1991 Gulf War to make up for lost production from Iraq, which was hit with a United Nations embargo when it invaded Kuwait. However, Saudi Arabia, which had the greatest surplus capacity, made up most of the supply gap.
Asked if Iran would compromise with the Saudis if Riyadh made any proposals, the Iranian oil source said: "This is speculation. I will not comment on this."
12/19 12:00 Oil Prices Continue To Decline As Bombs Fall
Buy on the rumor, sell on the action. That was the thinking in oil markets as traders pushed crude prices down sharply as the U.S. resumed bombing Iraq for a second day.
West Texas Intermediate Crude for January delivery fell $1.35, to $11.03 Thursday, a day after the market drove up oil prices 83 cents just as the raids were getting under way.
On Friday, crude-oil futures dipped below $11 a barrel even as a third wave of airstrikes against Iraq was widened to include some oil facilities. The January contract was down 10 cents to $10.93 through the early afternoon.
The decline in oil price, which extended the losses that crude-oil futures posted Thursday, underscores traders' conviction that a world-wide oil glut won't be eliminated anytime soon.
Hardly a blip was visible in the market as news of the third wave of airstikes emerged just after midday Friday. U.S. and British warplanes worked together, and although military sites remained the prime focus, the U.S. announded the oil installations also were targeted. No specifics were immediately available.
The continued weakness indicates how bearish oil markets have become amid a global oil glut: Even a military action in the Persian Gulf, the cradle of the world's oil supply, couldn't spark a sustained rally. In large part, the traders have come to view Iraqi oil as relatively inconsequential.
“There is too much oil on the market to worry about Iraq,” Saudi Oil Minister Ali Naimi told reporters after meeting his Norwegian counterpart, Marit Arnstad, in Oslo Friday.
In fact, even as the bombs were falling elsewhere, an oil tanker in a major Iraqi port was loading oil for sale in foreign markets under the supervision of United Nations monitors. John Mills, a U.N. spokesman, said that there weren't plans to stop the oil-for-food program that allows Iraq to export up to $5.2 billion of oil during the next six months.
Further, oil markets got more bearish news when oil ministers from Saudi Arabia, Venezuela and Mexico failed to agree to new production cuts after meeting in Madrid. Traders had hoped that the three, which spearheaded agreements earlier this year among the world's oil producers to cut 2.6 million barrels from world markets, could at least agree on a framework for new reductions.
“That's what the oil complex wanted more urgently than anything else, and that's the one thing they didn't do,” said Peter Beutel, president of Cameron Hanover Inc., an energy-consulting company in New Canaan, Conn.
Recent data show that the Organization of Petroleum Exporting Countries has been losing its grip on its agreements to cut output. Compliance fell to just 79% in November, down from 88% in October. That means 520,000 more barrels a day of OPEC oil are hitting world markets than are called for in the agreement.
Some analysts even speculated that producing countries might use the chaos to boost output. Low oil prices and production cuts have hammered their budgets, and motivation is growing for them to pump more oil. They would have an incentive if a new round of output cuts is negotiated in the spring because countries generally want to enter such talks with the highest possible production levels.
Still, traders and analysts cautioned that higher prices may yet be in the offing. U.N. monitors could deem Iraq too dangerous, and their evacuation would halt the export of Iraqi crude. Although Iraq's oil-production facilities apparently aren't being targeted by the U.S., even the smart weapons used today sometimes go astray. Finally, Iraqi leader Saddam Hussein could decide on his own to cut off exports.
That seems unlikely, because the oil sales are practically Iraq's only source of income for food and vital imports. Even the total absence of Iraqi oil would have only a limited effect on markets. Iraq produces just 1.8 million barrels of the world's daily supply of about 75 million barrels. Analysts estimate that world markets are awash in an extra eight days of oil, and ships in New York harbor are having difficulty finding storage, because many terminals are already brimming.
Iraqi oil represents just about 8% of U.S. imports. However, U.S. companies have been among the biggest buyers of Iraqi oil, scooping up a full 38% of Iraqi output over the previous six months because the country is pricing its crude aggressively.
Among the leading U.S. importers of Iraqi crude in September were Exxon Corp. of Irving, Texas, and Valero Energy Corp., a San Antonio refining concern, according to the U.S. Energy Information Administration. Exxon said it doesn't have long-term contracts for Iraqi crude, and only bought “spot cargoes on the international market when the terms were commercially attractive,” a spokesman said. He said all purchases were in compliance with U.S. laws and U.N. resolutions.
Any disruption in Iraqi oil would only matter if it was sustained. Gary Ross, chief executive officer of Pira Energy Group, a New York-based consulting firm, estimates that 50 million barrels would have to disappear from storage to raise prices by $1 a barrel. Markets would have to think all Iraqi oil would be gone for at least a month to have a measurable impact.
Still, Mr. Ross said he doesn't expect markets to be testing new lows anytime soon, because traders were unlikely to go on vacation with major short positions amid the uncertainty the bombing created.
12/20 10:31 Venezuela's Chavez to meet Zedillo for oil talks
CARACAS, Dec 20 - Venezuelan President-elect Hugo Chavez plans to meet Mexican President Ernesto Zedillo in Mexico in the next few days for what he described as "urgent" talks.
Chavez, speaking to reporters late on Saturday, said one of the main topics of conversation with Zedillo would cover oil, following a meeting in Madrid last week between Saudi Arabia, Venezuela and Mexico, the architects of two rounds of oil production cuts this year to shore up prices.
"I'm considering the possibility of going to Mexico during the Christmas period ... given the urgency put to me by the Mexican president," Chavez said.
He said Zedillo called him on Friday night, shortly after his return from a three-nation South American tour.
Mexican Energy Minister Luis Tellez, whom Chavez met in Caracas a week ago, said after the Madrid talks that fresh output cuts were a possibility, if market conditions warranted it, to prop up prices at 25-year lows.
Chavez on Saturday reiterated that his administration, due to take office on Feb. 2, would respect "existing oil production cuts". Venezuela at the Madrid meeting extended its cut commitments until the end of 1999.
12/20 12:41 Oil seen weakening as industry watches Iraq policy
LONDON, Dec 20 - Weak oil prices, currently testing 22 year lows, could drift even lower on Monday after a sustained U.S. and British military attack on major Middle East producer Iraq apparently left its petroleum exports undented.
Western oil industry officials said initial assessments indicated that four days of air strikes aimed primarily at Iraqi military targets seemed to have had little direct impact on the Arab nation's oil export facilities. "It's not possible to tell for sure so soon but, with the exception of the Basrah refinery, everything seems to be reasonably okay," said one official who is in regular contact with Baghdad. Exports ran as normal throughout, he added.
"Oil prices look set to go lower again on Monday," said Nauman Barakat of investment house Prudential Bache in New York. "Without any disruption to the flow of oil from Iraq I think we'll be testing the lows again."
Industry officials familiar with monitoring procedures under the United Nations oil-for-food exchange programme, said on Sunday that Iraqi oil liftings were running close to schedule from two exit points on the Gulf and in the Mediterranean.
Liftings of southern Iraqi Basrah crude from the country's Gulf port of Mina al-Bakr had proved a little slow but no shipments had been cancelled, the official said.
Industry analysts will now be watching for any signs of a change in heart in the West over United Nations sanctions on Iraq or the operation of the United Nations oil-for-food programme.
Iraq's continued cooperation throughout the air strikes with the U.N. programme appeared to signal that Baghdad had no intention of providing fellow producers with relief from depressed oil prices by withdrawing from the deal.
Iraqi President Saddam Hussein is thought unlikely to want to reward Gulf Arab neighbours such as Kuwait and Saudi Arabia with higher oil prices by stopping Iraqi oil sales, even though the U.N. controls his export revenues.
Benchmark Brent blend crude futures in a glutted market closed at just $9.98 a barrel on Friday after wiping out a dollar price gain posted on Wednesday as Washington's intentions towards Iraq became apparent.
Hardliners on Iraq the United States and Britain insisted on Sunday that eight-year-old sanctions will remain in place, leaving the U.N. to control Iraqi petroleum revenues.
British Prime Minister Tony Blair said the next move was to further develop a "policy of containment", and U.S. President Bill Clinton pledged his support for oil-for-food.
For its part, Iraq said it would not now permit the return of U.N. weapons inspectors to the country. Iraqi Vice-President Taha Yassin Ramadan said that the U.N. Special Commission on the disarmament of Iraq was now "behind us".
Iraq's ambassador to the United Nations, Nizar Hamdoon, said on Friday that Iraq's goal for the lifting of sanctions might allow a reexamination of the role of UNSCOM. Diplomats said that without UNSCOM in Iraq the only option would be for "long-range" monitoring of the country's arms industry.
But even in the unlikely scenario of an early lifting of sanctions the short-term impact on world oil markets would not be great.
Iraq oil facilities, in disrepair after the Gulf War, are already producing at capacity of 2.5 million barrels a day, about 1.8 million of which goes for export.
Iraqi output before the Gulf War was about 3.2 million bpd and with cash put aside by the U.N. for repairs, production next year is expected to again approach those levels.
Only when the lifting of sanctions allows a ban on foreign investment to start opening up new Iraqi oilfields earmarked for French, Russian and Chinese companies will Baghdad be able move towards planned capacity of six million barrels a day.
The only significant damage last week to oil installations appeared to be at the Basrah oil refinery.
The U.S. said it targeted Iraq's the 126,000 barrel a day plant to stop smuggling of petroleum products. U.S. Defence Secretary William Cohen said the refinery came under a "very limited" attack. It was not known how much damage was sustained. Petroleum products are not exported under the U.N. deal.
Washington has accused Baghdad of smuggling up to 100,000 bpd of crude and products in contravention of U.N. sanctions imposed in 1990 after Iraq's invasion of Kuwait.
12/20 17:25 Venezuela's Chavez to visit Mexico, oil main topic
MEXICO CITY, Dec 20 - Venezuelan President-elect Hugo Chavez will meet with Mexican President Zedillo here on Monday, the Venezuelan embassy said on Sunday, and Chavez said one of the main topics of conversation will be the world oil glut.
Chavez told reporters in Caracas on Saturday he planned to meet with Zedillo this week. The embassy here said Chavez would arrive for a one-day visit Monday during which he would meet with Zedillo.
Officials from Saudi Arabia, Venezuela and Mexico met in Madrid last week and issued a call for compliance with existing restraint commitments from oil producers and a deal for Venezuela to extend its cuts through all of 1999.
The three countries were the architects of two rounds of oil production cuts this year in an effort to shore up prices.
Chavez said said Zedillo phoned him on Friday night, shortly after his return from a three-nation South American tour.
Chavez on Saturday reiterated that his administration, due to take office on February 2, would respect "existing oil production cuts."
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