KORNER REPORT / Crude Oil - 1
01/11 12:56 Annan says he assessing "noises" out of Iraq
UNITED NATIONS, Jan 11 - Secretary-General Kofi Annan said on Monday the Iraqi parliament's call for a review of U.N. resolutions posed a major challenge for the United Nations, but he questioned whether Iraq would follow through. "There are lots of noises coming out of Iraq and I think we need to wait a while to assess what is actually happening, including the threats against Kuwait and Saudi Arabia," Annan told reporters on arriving at U.N. headquarters.
On Sunday the Iraqi parliament adopted a resolution calling for further discussions on all U.N. resolutions concerning Iraq.
Most members of the 250-member parliament had called for rejection of U.N. Gulf War resolutions imposing economic sanctions on Iraq and ordering the scrapping of its weapons of mass destruction.
The parliamentary resolution made no mention of demands by members for withdrawal of recognition of Kuwait, Iraq's invasion of which in August 1990 led to the Gulf War. In 1994 the Iraqi parliament voted to recognize Kuwait within its U.N.- demarcated borders.
Sunday's resolution did, however, call for Kuwait and Saudi Arabia to pay reparations for damage inflicted by recent air strikes by the United States and Britain, which have bases in the two Arab countries.
Annan said of the vote in Iraq's parliament: "I think this will pose a major challenge for the Security Council and the United Nations. I do not know if this will be followed through; it has happened in the past that the Revolutionary Council has not always gone with the parliament."
Annan was also asked if he had evidence of ties between the U.N. Special Commission (UNSCOM) in charge of disarming Iraq and the United States -- a reference to reports last week that UNSCOM assisted U.S. intelligence efforts in Iraq.
"Absolutely not," the secretary-general replied. He said a statement issued by his spokesman, saying the United Nations had no evidence of any kind about those allegations, was factual "and I would hope that this issue could be put to rest."
"I don't think the issue is (UNSCOM executive chairman Richard) Butler and I don't think the issue is UNSCOM. In the scheme of things we are dealing with much larger issues, about compliance of Iraq and stability in the region that we should focus on."
Annan added: "I have absolutely no evidence and I think Mr Butler's statement has been forthright and the U.S. itself has said they gave him support that he required for his work."
01/11 15:28 NYMEX crude and products pare gains at close
NEW YORK, Jan 11 - Crude oil prices on New York Mercantile Exchange pared gains late on profit taking after advancing as much as 60 cents by early afternoon, traders said.
Concerns over "bottlenecking" of heating oil deliveries due to cold weather across the country also added to bullish sentiment, a Maryland-based trader said.
Crude and heating oil futures were firmly supported by short-term colder weather forecasts, other traders said.
However, a warming trend, particularly in the largest heat consuming Northeast region seen beginning on Thursday, could cut down earlier hefty gains, they said.
At the close, NYMEX February crude last traded at $13.41, up 34 cents, after hitting an afternoon high of $13.75, up 68 cents.
February heating oil last traded at 37.35 was up 1.24 cents a gallon, down from a session high of 38.20 cents.
February gasoline traded at 39.45 cents a gallon, up 0.91 cent.
At one point in late trading, NYMEX crude came into backwardation -- in which prices are lower in the succeeding delivery month. Crude futures also were backwarded once last week after staying in the the opposite condition, contango, for about 15 months.
A blast of arctic air late Tuesday is likely to put the Northeast region into a deep freeze again, according to private forecaster Weather Services Corp.
But a warm front is expected to cross the Northeast on Thursday, spreading much milder weather across the region, it said.
Meanwhile, Atlantic Richfield Co (ARCO) said Monday it was no longer accepting nominations for February crude oil shipments on the Seaway pipeline.
Shipments are expected to average over 200,000 barrels per day for the month, a spokesman said.
Seaway is a joint venture between ARCO and Phillips Petroleum Co.'s pipeline subsidiary. It carries imported crude oil 550 miles from Freeport, Texas, to the delivery point for the NYMEX oil futures contract in Cushing, Oklahoma.
01/11 16:29 Cold blast helps boost ailing world oil prices
LONDON, Jan 11 - Ailing world oil markets took another step on the road to recovery on Monday as winter weather boosted demand for heating fuel, helping to ease a supply glut.
Benchmark Brent blend crude ended 31 cents higher at $12.05 a barrel, a two-month high and a rise of 25 percent from the lows of mid-December.
Lower than normal winter temperatures in the key fuel consuming regions in the northeast United States and northwest Europe have helped drain the huge stocks which last year pushed prices down to levels not seen in 12 years.
Weather patterns play a large part in determining oil prices. Analysts calculate last year's unusally mild northern hemisphere winter cost producers more than a dollar a barrel as a result of sickly demand. Brent averaged just $13.34 against $19.30 a barrel in 1997.
While colder weather in recent weeks has helped lift demand, disruptions to exports from the North Sea, West Africa and the Black Sea have also helped strengthen prices.
Project delays and some production closures as a result of low oil prices, particularly in the United States and Canada, also have helped stem supply.
Lower-than-normal temperatures are also helping oil prices in Asia where the weather in big consuming countries Japan and South Korea is forecast to remain cold over the next few days.
That has helped ease a year-on-year stocks surplus which for indsutrialised countries of the Organisation for Economic Cooperation and Development (OECD) hit more than 200 million barrels in the summer. The excess is estimated to have slipped to 70 million barrels by the end of December.
"If the weather stays colder than normal we could easily wipe another 50 million barrels off stocks in the first quarter," said Mike Barry of Energy Market Consultants in London.
As spare supply wanes, sellers are starting to obtain higher prices on the day-to-day physical cargo market.
Improved prices for prompt delivery cargoes in turn are erasing the economic incentive for companies to put oil into storage tanks.
That is a sea change from the pattern that became entrenched last year when consistently weak near-term prices sent excess oil flooding to inventories.
Nevertheless, most analysts still think producer group OPEC needs to act quickly again to underpin a price recovery by further curbing its supplies.
OPEC production rose to its highest in five months in December with supply edging up by 20,000 barrels per day to 27.45 million bpd, a Reuters survey found.
Taking account of higher Iraqi exports, net OPEC compliance with its 2.6 million bpd output cut package dived to less than 50 percent.
The group is due to meet in March for its first gathering since a tetchy November meeting when tensions between key members Saudi Arabia, Venezuela and Iran scotched any agreement.
Kuwait has led calls for the group to convene an earlier meeting. But Venezuelan policy may not become clear until president-elect Hugo Chavez takes office on February 2.
01/11 16:34 NYMEX crude, products end up despite profit-taking
NEW YORK, Jan 11 - Crude oil futures on the New York Mercantile Exchange pared gains late Monday on profit-taking after advancing by more than 60 cents by early afternoon, traders said.
But crude and heating oil futures ended with hefty gains, firmly supported by short-term colder weather forecasts and technical factors, traders said.
NYMEX February crude settled at $13.44 a barrel, up 37 cents, after last trading at $13.41, up 34 cents from last Friday's close. The contract surged to an afternoon high of $13.75, up 68 cents.
Concerns over "bottlenecking" of heating oil deliveries, due to cold weather across the country, also added to bullish sentiment, a Maryland-based trader said.
However, a warming trend, particularly in the Northeast, the largest U.S. heating oil-consuming region, is expected to begin on Thursday, other market watchers noted. That could take some steam out of the market's bullish mood.
February heating oil finished at 37.43 cents a gallon, up 1.32 cents. It last traded at 37.35, up 1.24 cents, down from a session high of 38.20 cents.
February gasoline ended at 39.15 cents a gallon, up 0.96 cent, after last trading at 39.45 cents a gallon, up 0.91 cent. The contract eased from its session high of 40.05 cents.
In London, February Brent on the International Petroleum Exchange ended at $12.05, up 31 cents. The contract rose above the psychologically important $12-a-barrel mark on Monday for the first time since November.
At one point in late trading, NYMEX crude came into backwardation -- a situation in which prices are lower in each succeeding delivery month. Crude futures also were backwarded once last week after staying in the the opposite condition, contango, for about 15 months.
As for the weather, a blast of arctic air late Tuesday is likely to put the Northeast region into a deep freeze again, according to private forecaster Weather Services Corp. of Lexington, Mass.
But a warm front is expected to cross the Northeast on Thursday, spreading much milder weather across the region, it said.
Traders said the latest weekly inventory data due out late Tuesday from the American Petroleum Institute (API) could provide the market with fresh guidance.
Last week, a huge 15-million-barrel drawdown in U.S. crude inventories in the API and U.S. Department of Energy data for the week ending Jan. 1 sparked a rally at midweek and a technical breakout above $13 a barrel later helped the market move up by $1.02 for the week.
But analysts cautioned that the psychological market reaction could turn to disappointment in the next two to three weeks as crude drawdowns were made during the last week of 1998 for tax purposes. "As the normal pattern restores these stocks during January, we anticipate profit-taking tomorrow ahead of the (API) data," said Tim Evans, senior analyst at Pegasus Econometrics Group.
Traders said the market remains watchful of increasing tensions in the Gulf.
On Monday, U.S. jets attacked two Iraqi missile sites in the northern no-fly zone on Monday.
The attack followed weekend developments that included a call by Iraqi President Saddam Hussein for Arabs to topple their leaders, which in turn sparked calls in the Gulf media for his overthrow.
Kuwait reacted to the Iraqi "threat" by alerting some of its military unit to full combat-ready status.
On Monday, U.S. Defense Secretary William Cohen reiterated warnings that Washington was prepared to act militarily if Baghdad threatened Kuwait, other Arab neighbors or its own people.
01/11 16:50 Albright set for Gulf trip, tensions rise in Iraq
WASHINGTON, Jan 11 - Tensions rose in the Gulf on Monday as U.S. planes again blasted Iraqi missile sites in the northern no-fly zone and Secretary of State Madeleine Albright announced a visit to two key Arab states to discuss Iraq.
U.S. State Department spokesman James Rubin said Albright planned later this month to go to Saudi Arabia and Egypt -- probably the most influential Arab states and Washington's closest allies -- for talks on Iraq and the Middle East.
Albright is likely to try and get Arab support for the policy of containing Iraq through sanctions backed by tough military force.
News of Albright's Gulf visit came as U.S. planes attacked two Iraqi missile sites in the northern no-fly zone on Monday in the fifth clash in two weeks with Baghdad, whose forces also violated the southern exclusion zone, the Pentagon said. With hostility running high, the United States said it was boosting its air power over southern Iraq and Kuwait said it had put part of its military on full, combat-ready alert in response to Iraqi "threats" to Gulf Arab states.
U.S. Defense Secretary William Cohen, on a visit to Japan, reiterated warnings that Washington was prepared to act militarily if Baghdad threatened Kuwait, other Arab neighbors or its own people.
Also underlining Western friction with Iraq, chief U.N. weapons inspector Richard Butler said he was suspending flights by U.S. U-2 spy planes over Iraq while the U.N. Security Council debated the future of the operation to control Baghdad's arms.
Butler also acknowledged that the operation, known as UNSCOM, may be revamped as a result of the current crisis with Baghdad but insisted the dismantling operation in Iraq was not finished and rejected suggestions he should resign.
The suspension of high-altitude surveillance flights over Iraq, which are under UNSCOM's command, would not affect U.S. and British monitoring of the Western-designated no-fly zones.
"The coalition will continue to enforce the no-fly zones vigorously. These provocations are a reminder of the threat that Saddam poses to the region and the need for vigilance in containing that threat," National Security Council spokesman David Leavy said.
The Pentagon said there was no U.S. damage or casualties in the latest two incidents in the northern Iraqi no-fly zone on Monday and that all U.S. planes returned safely to base in Incirlik, Turkey. Damage to Iraqi forces was being assessed.
U.S. defense spokesman Army Lt. Col. Steve Campbell told Reuters both incidents occurred about 2:45 a.m. EST (0745 GMT), or 10:45 a.m. local time, near Mosul in northern Iraq.
"In both cases, coalition aircraft were illuminated by Iraqi air defense missile systems," Campbell said.
In one case, two U.S. F-15 warplanes responded by dropping two precision-guided bombs on an Iraqi missile launch site and in the second incident an F-16 jet fired a High-Speed Anti-Radiation Missile (HARM) at an Iraqi site.
Maj. Joe LaMarca, a spokesman for U.S. Central Command in Florida, said there were four violations on Sunday in the southern zone and one on Monday, but no clashes were reported.
Two Iraqi MiG-21 planes crossed into the southern no-fly zone about 3 a.m. EST (0800 GMT) and then turned around and flew directly back. "There were no engagements," he said, adding coalition planes were not in the area at the time.
LaMarca said eight more F-16 warplanes would be deployed to patrol the southern no-fly zone. This would bring the total number of aircraft in the southern area to 193, he said. The F-16s are especially adapted to carry sophisticated missiles to destroy anti-aircraft radars. Four more aerial refueling tankers would also be sent in to help police the no-fly zone.
There has been an increase in confrontations since the United States and Britain launched four days of heavy air raids against Iraq last month after Baghdad refused to cooperate with U.N. weapons inspectors.
Iraqi President Saddam Hussein said after last month's raids that Baghdad no longer would recognize the no-fly zones, set up after the 1991 Gulf War to protect Kurds in the north and Shiite Muslims in the south from Iraqi attacks.
Iraq's parliament on Sunday passed a resolution calling for further discussions on all U.N. resolutions on Iraq declared after the Gulf War. Kuwait said it had put part of its military on full, combat-ready alert in response to Iraqi "threats" to Gulf Arab states.
U.S. defense chief Cohen said on Monday any move by Iraq to withdraw recognition of Kuwait would be a flagrant violation of U.N. Security Council resolutions, adding: "We are watching it very closely."
He refused to say in response to questions whether Washington and London might be preparing for further raids after the Muslim observance of Ramadan ends next week.
U.N. Secretary General Kofi Annan said on Monday the Iraqi parliament's call for a review of U.N. sanctions posed a major challenge for the United Nations, but he questioned whether Iraq would follow through with it.
Butler, Annan's chief weapons inspector in Iraq, told a conference in Washington that his monitoring operation was not finished and rejected suggestions he should resign.
Pressure mounted on Butler to quit after allegations last week that some elements of UNSCOM acted as spies for the United States. Russia urged him to resign and France called for a new weapons monitoring organization.
Butler predicted the U.N. Security Council would reach a compromise on its future operations in Iraq. But he acknowledged UNSCOM could be "modernized" in the future and "be a bit different than what we see today."
01/11 17:06 U.S. cash crude prices higher with futures, cold
NEW YORK, Jan 11 - U.S. cash crude oil prices shot higher on Monday, following the lead of a futures market brightened by bitter cold weather in the Northeast.
The near-month February contract on the New York Mercantile Exchange settled up 37 cents at $13.44 per barrel, leaving it only a cent below the March contract.
Along with the cold spell, continuing tensions between the U.S. and Iraq helped fuel the rally.
Early Monday, U.S. jets fired on an Iraqi radar site after it targeted the jet fighters, the Pentagon said. It was the fifth such incident in the past two weeks.
Traders said perhaps more important in rallying the market was news that Kuwait put some of its army on alert and was preparing to call up reserves.
As was seen most of last week, the major Louisiana grades were moving in relation to the U.S. cash crude benchmark West Texas Intermediate/Cushing while the Texas grades were mostly steady.
LLS/St. James was done at 5, 7, and 8 cents over WTI/Cushing before it later backed down to a three cent premium.
Heavy Louisiana Sweet/Empire was done at minus 20, 19, 10, and nine cents to WTI/Cushing.
Eugene Island was up a couple cents to -$1.07/-1.05; West Texas Sour/Midland was down slightly at -$1.15/-1.10; and West Texas Intermediate/Midland was unchanged, at -19/-16 cents.
Among the reasons given by traders for the additional LLS strength were heightened value of Dated Brent and residual affects of the Dec. 31-Jan. 6 closing of the Louisiana-to-Illinois Capline Pipeline.
Meanwhile, ARCO said Monday it is no longer accepting nominations for February crude oil shipments on the Seaway pipeline, which carries imported crude from Freeport, Texas to Cushing, Oklahoma.
Colder weather in the U.S. Northeast as well as in Japan, South Korea and Northwest Europe have all drawn down on the oversupplied world market, helping the futures market in general, oil analysts said Monday.
Also, there have been production disruptions in the North Sea, West Africa and the Black Sea.
Better prices for prompt delivery cargoes are eliminating the incentives to keep oil in storage. This is different from a year ago when weak near-term prices sent crude and its products into storage.
01/11 17:24 US Product Outlook-turnarounds tighten the Gulf
NEW YORK, Jan 11 - Seasonal maintenance works on U.S. Gulf Coast refineries and pre-summer stockpiling have boosted gasoline prices in the refining hub, with traders on Monday expecting prices to extend their gains this week. "Gasoline has steadily been coming up. There are enough folk with planned maintenance to have gradually tightened the market," a Gulf Coast trader said.
But traders said the volume of refining capacity being shutdown is not more than usual for the season. Some traders even thought it would be lower after a heavy fourth quarter schedule.
Among the refiners with turnarounds is independent Valero Corp <VLO.N> which has planned a major shutdown at its Corpus Christi, Texas refinery which produces around 117,000 barrels-per-day (bpd) of gasoline and 35,000 bpd of distillates.
The plant will be closed January 9 to February 10 for works including increasing its 76,000 bpd heavy oil cracker capacity to 80,000 bpd.
Murphy Oil Corp. also has plans to shut its 100,000 bpd Meraux, La. refinery, for a three-week turnaround mid-January, a company spokesman said.
Traders said Koch Industries was also carrying out a turnaround at its 280,000 bpd Corpus Christi, Texas refinery but the company declined to comment.
As a result of the turnarounds, Gulf Coast gasoline prices was the bull across the hubs last week, rising over 5.00 cents per gallon to around 38.20 cents, with some traders still assessing it underpriced.
"We still like gasoline...it is underpriced," one Gulf source said.
The gain on New York Harbor gasoline was not as large at 1.92 cents to 36.25 cents, but prices were firm enough to keep the arbitrage window wide open for Eurograde gasoline cargoes from Northwest Europe.
"The arb is wide open...gasoline's strength has allowed some 12 to 15 gasoline cargoes to arrive by January 20," northeast trader said. "After that, the market will steam off."
But other market sources were not as bearish on the midtermgasoline outlook, saying the imports also consisted of Russian gas oil cargoes.
"There is a lot of both European gasoline and Russian gas oil," a broker said.
Colder than usual temperatures supported heating oil prices by over a cent last week to nearly 36 cents per gallon in the northeast and 33.25 in the Gulf.
But the cold mainly boosted demand for jet-kerosene for blending into heating oil which saw prices soar by nearly 4.0 cents to 38.30 cents in the Harbor and almost 2.0 cents to 36.70 cents in the Gulf.
But by Monday afternoon, jet fuel cash differentials in the northeast started to loose steam, shedding 1.50 cents to a premium of 4.50 cents to the New York Mercantile screen as the wide arbitrage saw a flood of material from the Gulf.
"There is just too much stuff coming up the (Colonial) Pipeline and there are containment problems up here," a Harbor trader said.
Northeast gasoline and distillate inventories were up in the week ending Jan. 1 as part of American Petroleum Institute's hike in total U.S. distillates of 3.8 million barrels and in total gasoline by 740,000 barrels
Adding further pressure, traders said northeast heating oil storage was making way for pre-summer gasoline stockpiling, particularly amid the short-term colder weather forecasts. |
