Commodities trading outlook: crude oil and natural gas futures

Crude oil advanced during trading in Europe today, as tensions in Eastern Europe pushed risk premiums. Additionally, a bullish report on US stockpiles earlier in the week boosted oil contracts. Meanwhile, natural gas futures traded even, after a sizable drop on growing supplies in the US yesterday.

West Texas Intermediate futures for delivery in June traded for $100.84 per barrel at 13:09 GMT on the New York Mercantile Exchange, adding 0.58%. Daily prices were between $100.23 and $101.18 per barrel, reaching the highest level in 10 days. The contract added 0.51% over the previous four sessions and is on track for a weekly gain as investors hedge risks for the weekend, when the independence vote in eastern Ukraine will be held.

Today Russia celebrates 69 years since the victory over Nazi Germany. Moscow witnessed a massive military parade, displaying both hardware capabilities and patriotic fervor. Later in the day Russian President Vladimir Putin flew to the Crimea, where the newly-Russian city of Sevastopol is preparing for a similar parade tomorrow, the BBC reported.

Meanwhile, tensions are on the rise in eastern Ukraine, as an independence referendum is taking place on Sunday in the Russian-speaking regions of Luhansk and Donetsk. Rebels disregarded Mr Putin’s pleads to postpone the vote, and said the poll will go ahead as planned. “The referendum will take place on 11 May. We are getting ready, ballot papers are being printed, everything remains in force. Nothing will change, it will not be delayed,” pro-Russian rebels in Luhansk were quoted as saying.

Mariupol, a town in the Donetsk region, has reportedly seen shootings between government forces and separatist militia today, with several people dead.

Previously, battles between government troops and rebels resulted in the deaths of at least 4 soldiers and, reportedly, more than 30 rebels in the rebel-held town of Sloviansk. The city remains blockaded.

Supplies

The government report on US oil inventories for the week ended May 2nd revealed stockpiles of crude oil had backed off from all-time high figures for the last two weeks. Supplies stood at 397.6 million barrels, registering a decline of 1.781 million barrels. Motor gasoline supplies added 1.608 million barrels, while distillates inventories contracted by 0.447 million barrels.

Crude oil in storage at Cushing, the delivery point for WTI, fell by 1.4 million barrels to 24.0 million. Hubs at the Gulf Coast slightly decreased inventories to register 213.4 million barrels for the week.

The US consumes about 21% of the world’s oil supply, and inventories impact prices more than most other factors.

Elsewhere, a deal between Libya’s government and rebels occupying two oil-exporting ports in the east seems less likely, after an appointment of an Islamist-backed PM fueled distrust between the parties.

“Libyas two most important oil terminals, Ras Lanuf and Es Sider, will remain shut for the foreseeable future which is likely to continue to severely hamper the supply of oil,” said analysts at Commerzbank in a note.

Iran is also in focus, as negotiations between Tehran and six world powers over the nuclear capabilities of the country had given “useful” results. Sanctions limit Iran’s oil exports, and a possible breakthrough could result in a surge of fresh oil supplies on the markets, which would push down on prices.

Natural gas futures

Front month natural gas futures, due in June, lost 0.35% at the new York Mercantile Exchange to trade for $4.556 per million British thermal units at 13:10 GMT. Prices ranged from $4.553 to $4.598 per mBtu, nearing the lowest point in 20 days. The contract is headed for a weekly loss, as over the previous four sessions it lost 2.33% as the weather over the US continued to improve and allowed for a stockpile buildup.

Natgasweather.com reported that the mid-Atlantic states, alongside the Southeast and regions of the Northeast and Midwest will be warming nicely the next few days, as the system of high pressure over the South Plains moves eastward. Meanwhile, a period of exciting weather will be setting roots over the central states, as a system moves in from the West. Over the following weeks a series of weak cold blasts will be penetrating from Canada to reach deep into the Southeast, though temperatures will not be lowered by much. On the Pacific Coast, temperatures will be on-par with the average for this time of year. However, next week is projected to bring more record-breaking heat for the region, suggesting higher power demand.

According to Accuweather.com New York will be cloudy and rainy today, which will drag down the daily high reading to no more than 61 degrees Fahrenheit, though the low will be above average at 59 degrees. Over the next few days a significant warm-up is expected to push temperatures up into the 80s. Boston weather will be similar to that of New York, with rain and clouds today and rising temperatures to follow. Chicago will also be cloudy, though warmer than usual today and over the weekend, with temperatures ranging 55 to 77 degrees Fahrenheit. Weather in Los Angeles will be mostly sunny today and tomorrow, with readings between 58 and 71 degrees. On Sunday the temperatures will rise to as much as 82-83 degrees, and next week is set for another strong heatwave with expectations of more record-breaking temperatures in the high 90s.

Natural gas in storage in the US added 74 billion cubic feet for the week ended May 2nd, beating forecasts of a 71 bcf gain, to reach a total of 1 055 bcf. The increase is smaller than that of last week, which stood at 82 billion cubic feet. The slight slowdown is attributed to cooler weather over the East and a heatwave on the West Coast during the viewed period.