Commodities trading outlook: crude oil and natural gas futures

Crude oil futures received generous support from a bullish report on inventories in the US. Stockpiles were reported to have dropped some 8 million barrels. Elsewhere, Ukraine saw further confrontations on Tuesday, when the country’s richest man urged for peace and unity ahead of the presidential election on May 25. Meanwhile, natural gas futures orbited Tuesday’s closing price ahead of government data on supplies in the US tomorrow.

West Texas Intermediate futures for settlement in July traded for $103.42 per barrel at 14:58 GMT on the New York Mercantile Exchange, gaining 0.84%. Prices ranged from $102.78 to $103.50 per barrel, reaching a monthly high. Yesterday WTI added 0.52%, reaching a monthly peak of $103.01, and so far this week the contract has gained 0.77%.

Meanwhile on the ICE in London, Brent futures due in July recorded a 0.16% rise to trade for $109.87 per barrel at 14:49 GMT. Daily high and low stood at $110.28 and $109.70 per barrel, respectively, nearing a monthly high. Brent’s premium to WTI stood at $6.45, narrowing Tuesday’s closing margin of $7.36. Yesterday the European brand added 0.29%, though so far this week the contract has lost 0.06%, reaching a monthly peak on Monday at $110.33 per barrel.

The weekly Energy Information Administration report on oil inventories in the US for the week ended May 16 was released today. Crude oil supplies were shown to stand at 391.3 million barrels, recording a 7.226 million barrel decrease from last week, when stocks had grown by 947 000 barrels. On Tuesday the private American Petroleum Institute (API) suggested a 10 million barrel decline in inventories. A Bloomberg survey expected stockpiles to stand as they were, while a Reuters poll projected a 1 million increase.

Domestic production was reported at 8,434 million barrels per day (bpd), adding 6 000 bpd on the previous standing. Last week domestic output had grown by a further 78 000 bpd. Imports declined by 658 000 bpd to record 6.469 million bpd. Last week imports had grown by 242 000 bpd.

Supplies at Cushing, Oklahoma, the delivery point for WTI, were at 23.2 million barrels, dropping a further 200 000 from last week, when they had declined by 0.6 million. Meanwhile, crude in storage at PADD3, which is the Gulf Coast, were at 210.0 million, dropping 5.7 million since last weeks report, when hubs at the Coast had added 2.3 million barrels.

Motor gasoline supplies stood at 213.4 million barrels, which is a growth of 0.970 million since the previous report, when a 0.772 million decline was recorded. API reported a 135 000 gain on Tuesday. Distillates inventories grew by 3.399 million to stand at 116.3 million, while API suggested a 1.360 million increase. Last week distillates lost 1.124 million barrels. Refinery utilization rate logged at 88.7%, which is a slight decrease from the previous reading of 88.8%. Gasoline production averaged 9.592 million barrels per day, down 14 000 bpd since last week, when a 614 000 bpd increase was recorded. Distillates production was at 5.002 million bpd, which is a weekly growth of 91 000. Last week distillates production slowed by 128 000 bpd.

Ukraine, Libya

Hundreds of people attended staged rallies in Donetsk yesterday, after Ukraine’s richest man, Rinat Akhmetov, whose wealth is estimated at more than $11 billion, urged for a mass protest for peace. His Donbass Arena stadium hosted a crowd of several hundred chanting the Ukrainian hymn and waving the blue and yellow, in a peaceful unity demonstration.

The pro-Russian separatists threatened to nationalize Mr Akhmetov’s assets. His enterprises are based in the Donetsk region, and the leader of the “Donetsk People’s Republic”, one of the breakaway provinces, Denis Pushilin expressed disappointment in Mr Akhmetov’s “choice of allegiance.”

“Akhmetov has made his choice. Unfortunately, he chose against the people of Donbass. Paying taxes to Kiev means financing terrorism in Donbass,” Mr Pushilin was quoted as saying, the BBC reported.

Elsewhere, Libya is also offering some support, as fighting in Africa’s largest oil reserves holder left several dead in the weekend.

The country will hold a general election on June 25, as authorities attempt to quell unrest.

However, demands of radical change made by powerful warlords indicated peace might be a long way off. Earlier protests and insurgencies had previously crippled the oil industry of the country. Libya’s output was logged at 210 000 barrels daily as of Thursday, far below the 1.4 million bpd a year ago.

“Whatever happens in Libya at the moment shouldn’t really matter, basically because things can’t get much worse than they are,” said for Reuters Jonathan Barratt, chief executive of commodity research firm Barratt Bulletin in Sydney.

Natural gas

Front month natural gas futures, due in June, lost 0.31% at the New York Mercantile Exchange to trade for $4.538 per million British thermal units at 15:00 GMT. Prices ranged from $4.516 to $4.575 per mBtu. Yesterday the blue fuel added 1.83%, reaching a 10-day peak of $4.570 per mBtu, while for the week so far the contract has gained 3.12%.

According to AccuWeather.com, New York is set for several days of sporadic showers and thunderstorms, though temperatures will range 55-70 degrees Fahrenheit, which is normal for this time of year. Starting Sunday readings will rise to the lower 80s, as the weather will be mainly sunny and dry. Chicago will be also be warm today, with temperatures in the range of 54-78 degrees. Come Thursday readings will drop several degrees, but will remain, largely, within normal range for the season. Next week will bring significantly warmer weather, with highs 10 or more degrees above average. Los Angeles will be slightly cooler than usual today and will remain so for the next few days. Temperatures will reach up to mid 70s at most, while lows will be in the upper 50s. As in the rest of the country, next week will be hotter, and the West Coast will see readings in the mid-to-high 80s.

According to a Bloomberg survey, natural gas stockpiles have increased by 103 billion cubic feet for the week through May 16. The official Energy Information Administration report is due on Thursday.

Last week inventories recorded a 105 billion cubic feet increase for the week ended May 9, which was the highest injection in almost a year. Analysts had expected a build up of around 100 billion cubic feet.

Output from shale formations will lead to record output through the end of October, when heating demand kicks in, Goldman Sachs Group Inc. said in a note.

Offsetting possible inventory gains from increased production, to some extent, the US summer season sets in. As temperatures rise, power demand will be growing, as air conditioners are put to work. Power plants consume more than 30% of the blue fuel in the US.

“As long as we see signs of seasonal demand picking up, the tight fundamentals are going to provide an upward bias in the market,” said for Bloomberg Gene McGillian, analyst and broker at Tradition Energy in Stamford, Connecticut.