NY Crude Rises as Traders Switch Out of Jan. Contracts Ahead of Expiration
Crude Oil Rises Amid Pending Expiration and Technical Strength
New York, Jan. 19 (Bloomberg) -- Crude oil rose more than
3 percent as traders switched out of February futures before
tomorrow's expiration, and technical traders saw an opportunity
in charts to buy contracts.
There were about 44,000 February contracts outstanding when
futures opened and traders who did not want to be involved in
supplying or taking delivery of 1,000 barrels per contract had to
cancel their positions. When prices held firm at $12.12 a barrel,
technical traders jumped in, sending prices higher.
''Rather than play the game of chicken tomorrow, people are
going to come in and cover today,'' said Rich Redash, an energy
futures analyst at Prudential Securities in New York. ''The sane
people are probably getting out, you know, the ones who don't
have to be on blood thinners.''
February crude oil rose as much as 39 cents, or 3.2 percent,
to $12.50 on the New York Mercantile Exchange. The contract
bottomed out at $12.06 a barrel soon after floor trading opened
and then stayed at around $12.12, giving traders who watch
charts, graphs and price trends to make their decisions
confidence that prices had seen their lows.
''If you look at the charts and the charts alone, there's a
strong argument for $14 crude,'' said Michael Fitzpatrick, a
trader at Fimat USA Inc. in New York. ''This rally seems
technically inspired.''
Resistance, or the level that chart analysis indicates that
buyers will refuse to pay more, does not take hold until $13.50 a
barrel while firm buying support will be triggered at $12.12,
Fitzpatrick said.
Traders said expectations that inventories of heating oil
fell last week because of frigid weather were offset by forecasts
for mild temperatures this week.
Prices had fallen for four days, partly because of warmer-
than-normal weather. Weak demand for heating oil has left
supplies up more than 16 percent from a year ago. Though a cold
snap last week in the Northeast, heating oil's biggest market,
likely reduced supplies, warm weather forecast for the next seven
days could cut heating demand by almost a third. Low demand for
heating oil helped send crude prices to 12-year lows last month.
''We're not using enough heating oil,'' said John Kilduff,
senior vice president of energy risk management at Fimat USA Inc.
in New York. ''When it's 50 degrees in January, it doesn't help
move the juice.''
Heating oil rose as much as 0.94 cent, or 2.9 percent, to
33.50 cents a gallon and gasoline rose 0.91 cent, or 2.6 percent,
to 36.15 cents a gallon.
Temperatures are expected to range as high as 49 degrees
this week in New York City, the biggest heating oil consumer in
the U.S., according to Weather Services Corp. of Lexington,
Massachusetts.
Heating demand in the Northeast will be 31 percent below
normal over the next seven days, and temperatures will be 11
degrees above normal, according to forecasts by Weather
Derivatives of Belton, Missouri.
Heating oil inventories last week were more than 18 million
barrels larger than a year earlier, according to the American
Petroleum Institute.
The API will issue its weekly report on petroleum
inventories after trading tomorrow. It was delayed by one day
because of the Martin Luther King holiday.
In London, March Brent crude oil rose as much as 43 cents,
or 4 percent, to $11.14 a barrel, on the International Petroleum
Exchange.
Oil Strike
Traders are also waiting to see whether Venezuelan oil
workers will strike, disrupting crude oil exports from the third-
largest producer in the Organization of Petroleum Exporting
Countries.
Venezuelan President-elect Hugo Chavez warned the oil
workers' union yesterday against labor unrest after some unions
have threatened to strike in the next few weeks.
Chavez, who will be sworn in on Feb. 2, faces possible
strikes from Venezuelan oil workers, who are upset about layoffs
caused by cutbacks in oil production.
''These unions will not crush my spirit,'' Chavez said. ''If
it's my destiny to be crucified by them, so be it.''
Kilduff said, ''If Venezuela didn't have any oil workers to
load the tankers, it would definitely disrupt supplies. It would
definitely be supportive for the market.''
Still, traders are skeptical that oil workers will be able
to reduce exports.
''The oil workers threaten every year to go on strike and
every year the government threatens them back,'' said Tom Bentz,
senior vice president-energy at Cresvale International LLC in New
York. ''I don't think anything's going to happen.''
--------------------------------------------------------------------------------
© Copyright 1998, Bloomberg L.P. All Rights Reserved.
|
