Commodities trading outlook: crude oil and natural gas futures

WTI and Brent futures continued to climb during afternoon trade in Europe today. Traders seemed to have disregarded alarming data from China and continued to bet bullish. Meanwhile, natural gas futures dropped into the negative, after trading higher earlier.

West Texas Intermediate futures for settlement in July traded for $103.54 per barrel at 13:11 GMT on the New York Mercantile Exchange, up 0.86%. Prices ranged from $102.62 to $103.70 per barrel. On Friday WTI closed relatively unchanged for the week, at $102.71 per barrel.

Meanwhile on the ICE in London, Brent futures due in July stood for a 0.78% gain at $109.46 per barrel at 13:12 GMT. Daily high and low stood at $109.55 and $108.55 per barrel, respectively. Brent’s premium to WTI stood at $5.92, on par with Friday’s closing margin of $5.90. Last week the EU benchmark dropped about 0.5%.

“The economic data we’ve been getting have been a positive factor for the oil market,” Will Yun, commodities analyst at Hyundai Futures Co. in Seoul, said for Bloomberg. “There are positive developments on both the demand and supply sides, which gives support to crude prices at the moment.”

China economic data

Early on Sunday, China revealed foreign trade data. Exports beat forecasts to log a 7.0% annual growth for May. However, imports surprisingly dropped to -1.6% on an yearly basis, down from -0.8% for April, and well below expectations for a 6% growth standing. Slackening imports can be translated into sluggish domestic consumption for China, which accounts for 11% of total oil demand.

Furthermore, crude oil imports for the month declined by more than 9%, after a record high in April.

“There are still concerns over China’s domestic demand,” Will Yun added for Bloomberg. “Determining whether or not China is recovering is something we’ll need to wait and see.”

Tomorrow China’s government will reveal data, which will probably reinforce the somewhat gloomy domestic picture. CPI for May is forecast at a -0.1% on a monthly basis, after -0.3% for the previous month, while on an annual basis consumer prices have probably increased by 2.4% in May, after 1.8% in April. Also, Chinese PPI for May will be reported, and analysts expect a standing of -1.5%, after -2.0% in April.

Later this week, Chinese industrial production for May will be posted on Friday. Experts suggest a steady 8.8% growth year-on-year, after 8.7% in April. Also due on Friday, reports on fixed assets investments and retail sales for May are expected to reveal steady annual growth for both.

US

On Friday, the US, which accounts for 21% of total oil consumption, revealed bright employment data for May. New nonfarm payrolls stood at 217 000, as predicted, after 288 000 were added in April. Unemployment rate stood same as last month at 6.3%, which is the lowest level since September 2008, beating expectations of a slight increase.

Later this week more key data is due. Retail sales are expected to post a preliminary 0.4% monthly growth for May, after muted 0.1% increase the previous month. On Friday, PPI for May will be revealed. Analysts project a 0.3% gain on a monthly basis and 1.9% year-on-year.

Meanwhile, the risk premium stemming from the crisis in Eastern Europe has been gradually declining recently, and it would take a dramatic turn of events to stoke a serious advance for energies.

Elsewhere, Libya is only operating at 10% of oil-production capabilities, and things there cant get much worse. A sudden peaceful resolution is hardly plausible, as rival parties continue the struggle for power.

Natural gas

Front month natural gas futures, due in July, dropped 0.30% at the New York Mercantile Exchange to trade for $4.696 per million British thermal units at 13:13 GMT. Prices ranged from $4.683 to $4.743 per mBtu, reaching a monthly high. Last week the contract gained more than 3.5%.

The EIA weekly natural gas inventories report for the week through May 30 was released last Thursday. The log revealed a 119 billion cubic feet (bcf), beating expectations of 116 bcf increase. The injection is the biggest stockpiles had received since June 2009. Stockpiles levels remain 33% below the reading from the previous year, but gradually recover.

Last week a further huge gain of 114 bcf was logged, setting the tone for more record yields throughout the summer, as suggested by the EIA.

However, as summer season sets in and temperatures rise, air conditioning will become more intense, pushing up power demand, which could hurt natural gas supplies and support price levels.

Meanwhile, Kiev and Moscow began the next round of talks, regarding Ukraines huge gas debt.