Commodities trading outlook: crude oil and natural gas futures

WTI and Brent futures lower were during afternoon trade in Europe today, as the US posted weekly figures on oil inventories. Meanwhile, natural gas futures were up, ahead of a cool few days for top-consumer US.

West Texas Intermediate futures for settlement in August traded for $105.70 per barrel at 14:42 GMT on the New York Mercantile Exchange, down 0.31%. Prices ranged from $105.57 to $107.50 per barrel. The US contract dropped 0.13% yesterday, after a further 0.62% loss on Monday.

Meanwhile on the ICE in London, Brent futures due in August stood for a 0.88% drop at $113.45 per barrel at 14:43 GMT. Daily high and low stood at $114.65 and $113.23 per barrel, respectively. Brent’s premium to August WTI stood at $7.75, after Tuesday’s closing margin of $8.43. The European contract added 0.30% yesterday, after dropping 0.60% on Monday.

Inventories report

The US Energy Information Administration (EIA) posted its weekly oil inventories report for the seven day through June 20 today. The log revealed a 1.742 million-barrel gain for commercial crude oil inventories, after the private American Petroleum Institute (API) had suggested a 4 million-barrel gain on Tuesday. A Bloomberg survey projected a 1.7 million-barrel draw. The previous reading, for the week through June 13, showed crude inventories had lost 0.6 million barrels.

Oil at Cushing, Oklahoma, the delivery point for the NYMEX contract and the largest hub in the US, was reported at 21.8 million barrels for a 0.4 million-barrel increase, after a gain of 200 000 was logged for the previous week. Meanwhile, hubs at the Gulf Coast added 2.0 million barrels, after 1.2 million were drawn last week. The report for the week through May 30 saw a further 6 million-barrel drop for hubs at the Gulf.

Domestic production of crude oil logged a minor drop for a reading of 8.446 million barrels per day (bpd), after minor growth was recorded in the report for the week ended June 13. Meanwhile, imports of crude were also little changed at 7.341 million bpd, after also gaining slightly last week. Inbound shipments of crude have declined by about 1.4 million bpd over the past month, almost 20% of current imports.

Gasoline inventories added 0.710 million barrels for the week through June 20, while the API had reported a 2.2 million-barrel increase, after last week saw 0.8 million barrels added. Distillate fuels stockpiles levels increased by 1.177 million barrels, while the API posted a 0.253 million-barrel drop on Tuesday. Previously, distillates inventories had added 0.4 million barrels in the week through June 13.

Refinery utilization rate was up by 1.4% for a standing of 88.5%, after an insignificant drop was logged in the previous report. Gasoline production this week decreased by almost 10%, or 0.8 million bpd for a standing of 9.054 million bpd, negating a similarly massive 0.9 million-bpd increase last week. Distillates output averaged 4.877 million bpd for a minor weekly increase, after an equally unimpressive decline was reported last week.

Natural gas

Front month natural gas futures, due in July, added 0.24% at the New York Mercantile Exchange to trade for $4.546 per million British thermal units at 14:44 GMT today. Prices ranged from $4.517 to $4.587 per mBtu. The contract added 2.00% yesterday, after dropping 1.88% on Monday.

Movement to the downside is expected to be limited as the US enters the summer season when high temperatures spur electricity demand to power air conditioning, with power stations accounting for 30% of US natural gas consumption. The above-normal temperatures over the US recently will probably dent gains in the report this week, which will cover the seven days ending June 20.

“The latest forecasts suggests that the call on nat gas for cooling demand will not be atypical for this time of the year and thus inventory injections are likely to continue to outperform the historical injections,” Dominick Chirichella, senior partner at the Energy Management Institute in New York, said in a note to clients today, cited by Bloomberg.

Chirichella added that blue fuel stockpiles probably expanded by 101 Billion cubic feet (Bcf), while Tim Evans, an energy analyst at Citi Futures in New York, is expecting a gain of 93 Bcf, according to Bloomberg. NatGasWeather.com suggests a gain of about 100 Bcf, with a wider-than-usual range of variance.