NEW YORK, Feb 1 (Reuters) - U.S. crude oil markets were in sorry shape on Monday, and even supportive news from Venezuela did not help crude prices under pressure from anticipated builds in U.S. crude oil stocks.
Poor margins forced a slew of U.S. refiners to cut their crude runs last week and the move is expected to result in a build of crude stocks this week. The American Petroleum Institute releases its weekly U.S. inventory report late Tuesday, and the U.S. Department of Energy's statistics come out early Wednesday.
In addition to lower runs, traders cited refinery maintenance scheduled in March and weakness of foreign grades as depressing factors for U.S. crude oil prices.
"It isn't healthy," said one domestic crude trader. "I don't see in the short-term much chance that it will get any stronger than it has been."
Even news that Venezuela will reach full compliance in February to the 525,000 barrels per day (bpd) cuts in its production, a key prerequisite for further supportive measuresby crude producers, did not shake the market's bearishness.
Venezuela's incoming Minister of Energy and Mines, Ali Rodriguez said on Monday that his country was "cutting less than 100,000 barrels" per day, but did not say what production was at currently. Last June, as part of an agreement with other Organization of Petroleum Producing Countries (OPEC) members, Venezuela agreed to bring production down to 2.845 million bpd, but has not yet complied. A Reuters survey put December production at 3.02 million bpd.
Some traders welcomed the news, but said that in the short-term, prices would remain under pressure.
"We're in the process of making a bottom," said Warren Tashnek, a trader at FIMAT, but added that the process itself was a protracted one.
Reuters data gathered on Monday showed that U.S. refineries running light crude lost $1.22 per barrel last week after losing $1.04 per barrel the week before.
U.S. refinery runs have been cut about 1.2 million barrels per day (bpd) in the last month, American Petroleum Institute statistics show.
The pressure on crudes, especially sweet grades is apparent in cash markets. Many of the refiners who have announced run cuts have been offering out sweet crude that they would normally have run into the market, simultaneously cutting demand and increasing supply.
Light Louisiana Sweet/St. James, the main U.S. sweet crude, traded at 60 cents under benchmark U.S. West Texas Intermediate/Cushing on Monday, a loss of 25 cents in less than a week. The less liquid Heavy Louisiana Sweet/Empire also weakened sharply. HLS was valued at WTI minus 80 cents on Monday, as compared to minus 55 cents last Tuesday.
On the foreign side, traders were looking ahead to Colombian state-owned Ecopetrol's tenders for four cargoes of March-loading sweet Cusiana. But in the meanwhile, traders said two late February loading cargoes of Cusiana were still unsold.
"I think we're heading for a two-tiered market," said one trader, pointing to the unsold February cargoes which are under pressure. Demand and prices for March sweets are slightly better, supported by strong buying from India, whose state-owned Indian Oil Corp has taken about six VLCCs of Nigerian Qua Iboe out of market, the trader said.
Traders said the February cargoes of Cusiana were on offer at $1.10 under West Texas Intermediate, but the grade is said to be valued closer to minus $1.20.
The main domestic sour grade, West Texas Sour/Midland, gave up 15 cents since last Tuesday, to trade at a $1.32 discount to benchmark WTI on Monday, traders said.
Sour crudes are relatively supported on the foreign side, partly because of production shut-ins in Canada and the United States in the current weak price climate, traders said.
Ecuador's Oriente was value at a relatively strong differential, around $2.70 under WTI, traders said.
Iraqi Basrah Light also remained quite strong, valued around $2.25-2.20 under WTI, and traders reported deals done at minus $2.20 last week.
Iraq may provide further support in coming weeks, as its exports of crude under the United Nations oil-for-food program begin to taper off from recent near-record levels. On Monday, United Nations officials said that Iraq exported almost a million bpd, evidence that Iraq's four oil refineries, shut down after the Anglo-American bombing raids, are coming back up. Iraq's oil exports averaged 1.53 million bpd last week, down from a near-record 2.5 million bpd the previous week.
--
|
