Commodities trading outlook: crude oil and natural gas futures

Crude oil futures edged higher on the US weekly government report, which revealed drops at Cushing, in addition to declines in gasoline and distillates supplies. Elsewhere, the crisis in Ukraine continues to boil, as more deadly clashes were reported ahead of attempted peace talks. Meanwhile, natural gas futures made slight gains during early trading in Europe today, after sliding more than 10% recently as the colder season in the US is coming to an end.

West Texas Intermediate futures for settlement in June traded for $102.58 per barrel at 14:59 GMT on the New York Mercantile Exchange, rising by 0.87%, daily prices between $101.83 and $102.65 per barrel, reaching a three-week high. Yesterday the contract added 1.10%, after on Monday it gained a further 0.60%.

Meanwhile on the ICE in London, Brent futures due in July recorded a 0.64% gain to trade for $109.23 per barrel at 15:00 GMT. Prices ranged from $108.63 to $109.28 per barrel, nearing a two-week high. Brent’s premium to WTI July contracts stood at $7.29, narrowing last session’s $7.49 closing margin. Yesterday the European benchmark added 0.70% as Ukraine and Libya supported, after a further 0.48% increase on Monday.

The government report on US oil inventories for the week ended May 9th revealed commercial stockpiles of crude oil had increased to 398.5 million barrels, recording a growth of 0.947 million barrels. The gain exceeded expectations of modest gains, and is in line with earlier data by the private American Petroleum Institute (API), which logged at a 0.912 million barrel increase. The rise comes after a 1.781 million barrel decrease last week. Domestic production for the week averaged 8.428 barrels daily, 78 000 bpd on last weeks figure. Meanwhile, imports grew with 242 000 barrels per day to score 7.127 mbd.

Motor gasoline stocks have decreased by 0.772 million barrels, well above APIs reported 2.020 million decline, though below expectations of modest gains. Last week gasoline supplies had increased by 1.608 million barrels. Distillates stocks lost 1.124 million barrels, adding on last weeks 0.447 million barrel slip. Refinery utilization rate stood at 88.8% after 90.2% for the previous reported week. Gasoline production averaged 9.606 million barrels daily, gaining 0.614 mbd on the previous reading, while distillates were produced at a rate of 4.911 million barrels daily, slowing by 0.128 mbd.

Crude oil in storage at Cushing, the delivery point for WTI, fell by another 0.6 million barrels to 23.4 million. Hubs at the Gulf Coast added 2.3 million to stand at 215.7 million barrels.

Ukraine

Kiev is to host a new round of peace talks today. However, no rebels will take part and Moscow has already dismissed the possibility taking part in talks, should the format not include separatist representatives. The effort comes in light of Germany’s Foreign Minister Frank-Walter Steinmeier’s visit to Ukraine, and is part of the Organisation for Security and Co-operation and Europe’s (OSCE) roadmap out of the crisis.

Elsewhere, Russian Foreign Minister Sergei Lavrov said Ukraine was as close to civil war as it can get, adding that in the eastern regions there is already a “real war” between rebels and government forces. Indeed, the conflict continues to rage on, as seven Ukrainian military personnel were killed in an ambush by rebels near the town of Kramatorsk in Donetsk region on Tuesday.

Donetsk and Luhansk regions declared “victory”, following the referendum on Sunday. Separatist leaders said all Ukrainian troops in the provinces will be regarded as “occupying” forces. The Kremlin said it expects the “will of the people be implemented,” though has yet to comment on the rebels’ requests for Moscow to incorporate the regions in the Russian Federation.

Natural gas futures

Front month natural gas futures, due in June, added 0.69% at the New York Mercantile Exchange to trade for $4.388 per million British thermal units at 14:56 GMT. Prices ranged from $4.357 to $4.403 per mBtu. Yesterday the contract lost 1.71%, reaching the lowest level in a month, and over the last 10 days the blue fuel dropped 10.67%.

Weather reports project a stormy few days for the Northeast, with showers and thunderstorms. Over the second half of the week the strong storm will be moving through, bringing more heavy rains and possibly floods. The Midwest will see various patterns over the following days. The weakening storm will still make possible thunderstorm and locally heavy rains. The Northern Plains will be chilly, while Ohio, Kentucky and east Indiana will be warmer. The West Coast is enduring a heatwave this week, with temperatures highs close to the 100 mark. Windy conditions in California will be increasing the fire hazard to dangerous levels.

According to AccuWeather.com New York’s readings will range 60-67 degrees Fahrenheit today, largely in line with the average. Temperatures will rise over the next few days, however there will be some thunderstorms and rains. Chicago will also be rainy and cloudy, readings will range 42-55 over the next few days, about 10 degrees below average. Los Angeles will be very hot, with forecasts of near 100 degree highs for today and tomorrow. On Friday temperatures will start lowering to enter average range at 55-75 next week.

The Energy Information Administration will release its weekly report on natural gas storage levels for the week through May 9th on Thursday. Expectations of sizable gains due to milder weather over most of the US during the observed period pressured blue fuel contracts to drop more than 10% recently.