Commodities trading outlook: Crude oil and natural gas futures

Brent and West Texas Intermediate futures traded higher before noon in Europe today, on worries about the crisis in Ukraine. Natural gas reversed some of the gains it made yesterday, when storms and rains pushed readings in the central and eastern US down.

West Texas Intermediate futures for delivery in June traded for $101.47 per barrel at 13:21 GMT on the New York Mercantile Exchange, adding 0.62% on the last close. Daily high and low stood at $101.50 and $100.81 per barrel respectively. On Monday’s session the US brand dropped to the lowest price level in almost three weeks at 100.33. Over the last four sessions the US crude benchmark lost 2.95%.

Meanwhile on the ICE in London, Brent futures for June recorded a 0.73% gain to trade for $108.91 per barrel at 13:21 GMT, prices ranging from $108.96 to $108.00 per barrel. Brent’s premium to WTI stood at $7.44. Yesterday prices fell to a 2-week low of 107.86, registering the biggest drop in almost a month, while previously, during Friday’s session, the European brand reached the highest price level since early March at $110.63 per barrel.

The deepening crisis in Ukraine continued to support oil prices, as fears over the safety of supplies from Russia rally with every negative development in the conflict. Monday saw the US extend the list of sanctions to Russian individuals and companies. The expansion added 7 people and 17 firms, including the leaders of energy firms Rosneft and Gunvor, respectively Igor Sechin and Gennady Timchenko. Earlier today the EU announced 15 new names, added to the roster of Russian and Ukrainian nationals with travel bans and assets-freezes.

Meanwhile, the Kremlin said the West was bringing back the Iron Curtain of old, and accused the EU of following Washingtons orders. Russian Deputy Foreign Minister Sergei Ryabkov said in an interview with a Gazeta.ru that Moscow was “not at all inclined to repeat the so-called Crimea scenario in south-eastern Ukraine”, the BBC reported. However, NATO said it had no information that indicates a withdrawal of Russian troops from the Ukrainian border.

In Ukraine itself, tensions are rising. According to the BBC, as many as 40 people, including journalists, international observers, Ukrainian military personnel and pro-western activists, are held hostage in the town of Sloviansk – a bastion of pro-Russian separatism. Elsewhere, the eastern cities of Kharkiv and Donetsk saw bloody clashes between separatists and pro-Kiev demonstrators, while the extremist Right Sector nationalist group demanded arms from the authorities, to battle the pro-Russian militants.

Previously, news that Libya is lifting force majeure off of the eastern Zueitina oil exporting harbor pressured crude on Monday, with the European benchmark posting the biggest daily drop since early April. Earlier in the month, Libya’s state National Oil Corp (NOC) resumed oil exporting operations from Hariga – one of the other oil ports, seized by militants last year, which was freed after successful negotiations. Two other ports remain under militant control, however, and are not operating. Libya’s crude oil exports sank to 250 000 barrels daily, from 1.4 million a year ago, since rebels took control of the eastern ports.

US stockpiles

Upcoming data on crude oil supplies in the US on Wednesday is expected to reveal further gains in the world’s top consumer, with expectations of stockpiles adding to the record-high figure from last week, pressuring crude. A Bloomberg survey put the figure at 1.1 million barrels added for the week ended April 25th, ahead of official data from the Energy Information Administration on Wednesday, while a Reuters poll suggested inventories have risen by 1.9 million barrels. Later today the private American Petroleum Institute will release its own report on stockpiles.

Last week crude oil stockpiles rose by 3.524 million barrels in the week ended April 18th, to reach 397.7 million, exceeding expectations of a 2.3-million barrels increase, despite a higher refinery utilization rate at 91.0%. Gasoline inventories decreased by 0.274 million barrels, far below expectations of a 1.713-million decline, while distillate fuels gained 0.597 million barrels in supplies, in contrast to a forecast of a 0.463-million drop.

Natural Gas

Natural gas futures due in June lost 0.54% at the new York Mercantile Exchange by 13:23 GMT, trading for $4.773 per million British thermal units. Prices ranged from $4.754 to $4.825 per mBtu, closing to a two-month high. Monday’s session closed for a 3.03% gain on cooler weather over the US, turning the losses since last Thursday around.

According to Natgasweather.com the strong Spring storm, which caused devastating tornadoes over the central and southern US, will continue to generate heavy rains and thunderstorms. However, the primary force for heating demand throughout most of the US for the next few days will be the advancing Canadian cold-air system. Starting Wednesday and through the weekend the system will keep readings below normal for most of the Midwest and Northeast. While the central and eastern states are preparing for an extended period of cooler weather, lifting demand for heating, the Pacific coast will be experiencing a serious heatwave, with both the northern and southern regions pushing record-high temperatures. The impressive heat will probably result in people and businesses turning air-conditioners on, increasing power demand.

Accuweather.com reported that today, April 29th, Chicago is set for a normal day, temperatures between 48 and 68 degrees Fahrenheit. The following few days will see cooling, readings forecast to stand from 40 to 54. New York will be cold today and tomorrow, marking no higher than 53 degrees, 12 below the average, and falling as low as 44. Beginning on Thursday, a warm-up is expected, and it will push readings to normal over the second half of the week. On the West Coast the heatwave, which started on Monday will persist through the week. Los Angeles is set for daily highs topping 90 degrees Fahrenheit for the next 5 days. The heat is pushing historic figures, and is recording temperatures 20 degrees higher than average. On the northern part of the coast, Seattle will also be heating-up, registering highs of over 75, or 15-20 degrees above the average, over the next few days.

Stockpiles in the US grew by 49 billion cubic feet in inventories last week, beating forecasts of a 44 bcf gain, and pushing down on the blue fuel. Thursday will see the report for the week ended April 25th, and expectations are of only modest gains, if any.