Commodities trading outlook: crude oil and natural gas futures

Crude oil futures kept dropping before noon in Europe today, as growing supplies in the US weighed on prices in addition to bearish economic data from the US and China. Natural gas contracts also slid, as expectations on big gains in US stockpiles outweigh forecasts of cooler weather over most of the States.

West Texas Intermediate futures for delivery in June traded for $98.98 per barrel at 11:47 GMT on the New York Mercantile Exchange, dropping 0.76%, prices varied between $98.93 and $99.78 per barrel. The session registered the lowest price in more than a month at $ per barrel, as data from the US and China pressured. Yesterday the US benchmark dropped 1.52% on bearish news from the US, while on Tuesday the contract added 0.44% with growing tensions in Eastern Europe.

Meanwhile on the ICE in London, Brent futures for settlement in June also recorded a 0.71% loss to trade for $107.30 per barrel at 11:48 GMT, prices ranging from $107.26 to $108.12 per barrel, recording the lowest level in three weeks. Brent’s premium to WTI stood at $8.32. Yesterday the contract lost 0.84%, after adding 0.80% on Ukraine the previous day.

Yesterday’s government report on US oil inventories for the week ended April 25th revealed stockpiles of crude oil were at the all-time-high of 399.4 million barrels, registering growth of 1.698 million barrels, though falling short of expectations. Domestic production recorded an insignificant drop and averaged 8.352 million barrels per day, while imports stood at 7.412 mbd, down from last week’s 7.729 million barrels daily.

Motor gasoline supplies have increased by 1.564 million barrels, far-exceeding expectations of a 0.6 million barrels decrease, while distillates added 1.936 million barrels, well-ahead of a projected 0.583 million barrel rise. The increase in refined products comes in-line with higher than usual for the season refinery utilization rate, which stood at 91.0% for a second week. Gasoline production picked-up pace to settle at 8.693 million barrels per day, while distillates remain at 4.9 million barrels daily.

Crude oil in storage at Cushing, the delivery point for all WTI, fell by 0.6 million barrels to stand at 25.4 million barrels. Storage hubs at the Gulf Coast gained 5.7 million barrels to record at 215.3 million barrels, following the expected outflow from PADD2, where Cushing is located, to refineries on the coast.

Reports on US GDP growth and manufacturing PMI in China weighed on crude prices, as the worlds two top economies showed signs of slowing down. Data on quarterly Gross Domestic Product growth for the US revealed the first three months of 2014 added only 0.1% to the previous quarter, falling short of expectations for a 1.2% growth. Meanwhile, the government report on manufacturing PMI in China for April put the figure at 50.4, below projected 50.5, though still above the “50” contraction-expansion division line, which means activity is growing, albeit slower.

Elsewhere, fears over the crisis in Ukraine continue to offer considerable support for crude oil. In response to fresh US and EU sanctions, Russian President Vladimir Putin said: “If this continues, we will of course have to think about how (foreign companies) work in the Russian Federation, including in key sectors of the Russian economy such as energy.”

In Libya, the Zueitina port will begin loading its first tanker today, after being closed for nearly a year due to a rebel insurrection. News of the reopening of the terminal pressured crude on Monday, the European benchmark posting its biggest daily drop in a month.

Libya’s crude oil exports sank to 250 000 barrels daily, from 1.4 million a year ago, since militants took control of four eastern ports last year.

Natural gas

Front month natural gas futures, due in June, lost 0.96% at the new York Mercantile Exchange, to trade for $4.769 per million British thermal units at 11:50 GMT. Prices ranged from $4.768 to $4.823 per mBtu. Yesterday the contract fell 0.67%, though it recorded the highest midday price since winter at $4.852 per mBtu.

Natgasweather.com reported that the storm system over the eastern US will continue to generate some thunderstorms and local heavy rains. The cold Canadian air, which found itself in the southern US, will persist through the next few days, dragging readings down to the 40s and 30s in some places. Further cold blasts coming across the Great Lakes will settle in the Midwest and Northeast next week, keeping the cooler weather. The South Plains will see a build-up of higher pressure, which will collide with the cooler Canadian system to birth strong storms. Meanwhile, the West Coast is experiencing impressive heat, closing in on record-high readings.

According to Accuweather.com, the weather in Chicago will still be cooler than usual today, with temperatures ranging 42 to 52 degrees Fahrenheit, 6-7 below average. The next few days will see limited warm-up, with readings topping no more than 58-60 degrees. New York is set for a warmer Thursday, with temperatures between 54 and 73 degrees, which is 5-6 above the normal for the day. Starting tomorrow, however, the weather will normalize, before a slightly cooler weekend, at 2-3 below average. Elsewhere, Los Angeles is about to experience the hottest May 1st on record. Readings will push the 100 degree mark, beating the previous record of 89 set in 1929. Beginning on Friday temperatures will start to slightly drop, to enter average range next week.

The weekly Energy Information Administration report on natural gas stockpiles in the US for the week through April 25th is due later today. The blue fuel is expected to have added 75 billion cubic feet in supplies. The rise would grow on last week’s 49 bcf increase, to put the total volume of the blue fuel at 974 bcf.

After this winter’s brutally cold weather, natural gas supplies in the US were depleted, and as of last week stood at 52.9% below the 5-year average.