Commodities trading outlook: crude oil and natural gas futures

WTI and Brent futures were lower during afternoon trade in Europe today, as Libya increased its potential output. Shockingly improving employment figures from the US were unable to lift crude higher. Meanwhile, natural gas futures rose, as the US posted the weekly inventories report.

West Texas Intermediate futures for settlement in August traded for $103.89 per barrel at 14:08 GMT on the New York Mercantile Exchange, down 0.56%. Prices ranged from $104.29 to $103.69 per barrel. The US contract dropped 0.82% yesterday, and so far this week WTI has lost about 1.2%.

Meanwhile on the ICE in London, Brent futures due in August stood for a 0.37% drop at $110.83 per barrel. Daily high and low stood at $111.11 and $110.53 per barrel, respectively. Brent’s premium to WTI stood at $6.94, after last session’s closing margin of $6.76. The European contract dropped 0.94% on Wednesday, and so far this week Brent has also lost about 1.2%.

US outlook

Key US employment data was revealed today. Nonfarm payrolls for June increased by 288 000, which is a four-year peak. ADP posted a 281 000 figure on Wednesday, and analysts had earlier suggested a growth of about 210 000. The unemployment rate dropped to 6.1%, which is the lowest rate since September 2008.

“The job numbers are telling us that the economy is healthy, and people don’t need a lot of safe haven going forward,” Alfonso Esparza, a senior currency analyst in Toronto at Oanda Corp., said in a telephone interview for Bloomberg. “Gold will probably now start weakening again.”

Meanwhile, initial jobless claims for the week ended June 28 were slightly more than before at 315 000, and continuing applications for benefits for the week through June 21 were at 2.579 million, also logging a minor increase.

Also today, ISM posted its non-manufacturing PMI for June, for a reading of 56.0, slightly below expectations and the figure from last month, but standing for a sizable growth in the sector nonetheless. A reading of 50 or higher means expansion of economic activities, and vice versa. The bigger the distance from 50, the greater the pace of contraction or expansion. The services sector accounts for about 80% of US GDP.

Previously, ISM revealed its June manufacturing for the US yesterday, for a slightly worse-than-expected growth, but still standing for a considerable growth for the factory sector.

US oil report, Libya supply

The US Energy Information Administration (EIA) posted its weekly oil inventories report for the seven day through June 27 yesterday. The log revealed a 3.155 million-barrel draw for commercial crude oil inventories, gasoline stocks dropped 1.235 million barrels, while distillates added 0.975 million barrels.

Elsewhere, two oil-exporting ports in eastern Libya have been reopened after being closed for almost a year due to insurgency. The Es Sider and Ras Lanuf facilities are Libya’s biggest and third-biggest ports, and have a combined potential exporting capabilities of more than 0.5 million barrels per day. If they indeed reach optimal capacity they will increase Libya’s output five times, Bloomberg reported.

The rebels who had occupied the ports have handed them over to the newly elected government as a sign of support.

Libya’s output has dwindled since the ousting of former dictator Muammar Qaddafi, with exports dropping from 4 million barrels per day, to some 150 000 earlier this year. Libya holds Africa’s largest crude oil reserves.

Natural gas

Front month natural gas futures, due in August, added 0.57% at the New York Mercantile Exchange to trade for $4.382 per million British thermal units at 14:40 GMT today. Prices ranged from $4.385 to $4.329 per mBtu. The contract dropped 2.20% yesterday, reaching a monthly low of $4.338 per mBtu, and so far this week the blue fuel has lost about 1.2%.

The US Energy Information Administration (EIA) posted its weekly reading on natural gas inventories for the seven days ended June 27 today. Stocks were shown to have added 100 Billion cubic feet (Bcf), 22 Bcf more than the 5-year average gain for the week. NatGasWeather.com had predicted a gain of 99-103 Bcf.

Total gas held in underground storage hubs is still 25.7% lower than last year’s levels during the comparable period. However, the EIA has suggested gains will continue to be above-average, and that most likely inventories will be completely replenished ahead of winter heating season.

NatGasWeather.com reported earlier today, that the high pressure build-up over much of the western and southern US will keep temperatures relatively high, reaching above 100 in many places. A cooler weather system will track through the Midwest and Northeast, bringing showers and clouds and dragging readings down a few degrees, before another surge on high pressure later in the seven-day period. Tropical Cyclone Arthur remains impressive and could drive some market fear, though the high pressure over the Midwest should push the storm offshore. Cooling demand is projected to be moderate-to-high.

In the 8-14 day outlook, NatGasWeather.com projects a neutral trend for the US, with an upward bias. The southern and central, as well as the western states will be relatively warm for the whole period, with the northern and eastern states experiencing some cool early on, though following suit with heat soon after. Thunderstorms will increase over the South and Southwest as the monsoon season begins due to hot temperatures and high humidities.