Commodities trading outlook: crude oil and natural gas futures

WTI and Brent futures were slightly higher during midday trade in Europe today, after dropping on bearish news from Libya and a lack of escalation in Iraq, where the oil-producing South was deemed safe. Meanwhile, natural gas futures slumped ahead of some moderately cool days for the US.

West Texas Intermediate futures for settlement in August traded for $104.02 per barrel at 13:09 GMT on the New York Mercantile Exchange, up 0.24%. Prices ranged from $104.09 to $103.70 per barrel. The US contract dropped about 1.9% last week.

Meanwhile on the ICE in London, Brent futures due in August stood for a 0.23% gain at $110.89 per barrel. Daily high and low stood at $110.92 and $110.40 per barrel, respectively. Brent’s premium to WTI stood at $6.87, after last session’s closing margin of $6.58. The European contract dropped about 2.3% last week.

“Libya is finally set to return to the market, and the oil price reflects that,” Jens Naervig Pedersen, analyst at Danske Bank A/S in Copenhagen, said for Bloomberg. “We could see the Iraq premium decline in the future as risk is limited to supplies from the main production sites in the south.”

Iraq, Libya

Last week saw some inconclusive developments in Iraq. The military, reinforced by urgently-purchased Russian fighter-jets, had indecisive actions against the ISIS-led militants in the northern half of the country. Meanwhile, the Iraqi parliament failed to elect new leadership, as Sunni and Kurdish representatives boycotted the vote, depriving the election body of a quorum.

The semi-autonomous Kurdish state in northern Iraq fields its own army, and has recently come under attack by ISIS. The Kurds had occupied Kirkuk, an oil-center which lies beyond the borders of their state in Iraq, after the regular Iraqi army fled from the insurgents earlier in June, and have now declared they will not leave the city before an independence referendum takes place, with Israel also voicing support for an independent Kurdistan.

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.

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

Now the government has instructed the National Oil Company to start marketing supplies from the two terminals, Mohamed Elharari, spokesman for the state-run company, said for Bloomberg.

Natural gas

Front month natural gas futures, due in August, dropped 2.02% at the New York Mercantile Exchange to trade for $4.279 per million British thermal units at 13:11 GMT today. Prices ranged from $4.356 to $4.271 per mBtu. The contract dropped about 0.9% last week, reaching a three-month low of $4.329 per mBtu.

The Energy Information Administration’s weekly natural gas storage report revealed a 100-billion cubic feet gain in nationwide US inventories in the seven days through June 27th, well above the average gain, but in line with expectations. NatGasWeather.com had predicted a gain between 99 and 103 billion cubic feet, while the five-year average build for the respective period was 78 bcf.

Total gas held in US underground storage hubs amounted to 1 929 billion cubic feet, which was 25.7% below the comparable period a year earlier and 29.1% beneath the five-year average for the same week. However, the Energy Information Administration had forecast that injections will continue to be mostly above-average during the replenishment period through October, implying that stockpiles will be fully refilled ahead of the heating season’s start.

NatGasWeather.com reported on Monday that the southern and western US will remain very hot for the next seven days, with regular temperature peaks into triple digits. Meanwhile, the Midwest and Northeast will be subject to a cooler Canadian system tracking south, which will drag temperatures down midweek. However, soon after the system passes readings will climb into the 90s again. Cooling demand is expected to remain moderate-to-high.

In the 8-14 day outlook, NatGasWeather.com projected a neutral trend for the US, with an upward bias. Strong high pressure is set to dominate US weather, allowing for sunny and very hot days. More Canadian cooler systems are expected to turn south into the northeastern US, decreasing temperatures to comfortable for the region and lowering cooling outlooks.