Commodities trading outlook: crude oil and natural gas futures

WTI and Brent futures were lower during afternoon trade in Europe today, as the US posted weekly readings on oil inventories. Meanwhile, natural gas futures were slightly lower, ahead of the EIA weekly gas report on Thursday.

West Texas Intermediate futures for settlement in August traded for $102.59 per barrel at 14:37 GMT on the New York Mercantile Exchange, down 0.78%. Prices ranged from $103.60 to $102.51 per barrel. The US contract dropped 0.18% on Tuesday, after losing 0.51% the previous session.

Meanwhile on the ICE in London, Brent futures due in August stood for a 0.50% drop at $108.39 per barrel. Daily high and low stood at $109.00 and $108.25 per barrel, respectively. Brent’s premium to WTI stood at $5.80, after last session’s closing margin of $5.54. The European contract dropped 1.18% yesterday, after a further 0.36% loss on Monday.

US oil inventories

The US Energy Information Administration (EIA) posted its weekly oil inventories report for the seven day through July 4 today. The log revealed a 2.370 million-barrel draw for commercial crude oil inventories, after the private American Petroleum Institute (API) had suggested a 1.7 million-barrel draw on Tuesday. A Bloomberg survey had projected a 2.7 million-barrel drop. The previous reading, for the week through June 27, showed crude inventories had dropped 3.2 million barrels.

Oil at Cushing, Oklahoma, the delivery point for the NYMEX contract and the largest hub in the US, was reported at 20.9 million barrels for a 0.4 million-barrel gain, after a drop of 1.3 million was logged for the previous week. Meanwhile, hubs at the Gulf Coast saw 4.2 million barrels drawn, after a further 3 million drop was reported last week.

Domestic production of crude oil was little changed for a reading of 8.514 million barrels per day (bpd), after little change over the last two weeks as well. Meanwhile, imports of crude also saw minor change and logged at 7.285 million bpd. Inbound shipments of crude have dropped by about 1.4 million bpd over the past month, about 20% of current imports.

Gasoline inventories added 0.579 million barrels for the week through July 4, while the API had reported a 0.1 million-barrel increase, after last week saw 1.2 million barrels drawn. Distillate fuels stockpiles levels increased by 0.227 million barrels, while the API posted a 0.5 million-barrel decrease on Tuesday. Previously, distillates inventories had added 1 million barrels in the week through June 27.

Refinery utilization rate was unchanged for a standing of 91.6%, after a 3% increase was logged in the previous report, for a total increase of almost 5% for the last two weeks. Gasoline production this week was unchanged at 9.425 million bpd, after a 0.4 million bpd gain was recorded last week. Distillates output averaged 5.056 million bpd, also for a minor weekly increase.

Natural gas

Front month natural gas futures, due in August, dropped 0.21% at the New York Mercantile Exchange to trade for $4.195 per million British thermal units at 13:45 GMT today. Prices ranged $4.218 to $4.167 per mBtu. The contract dropped 0.50% on Tuesday, reaching a six-month low of $4.129 per mBtu, after a massive 4.1% loss on Monday.

“Without calls for sustained heat across the major gas-consuming regions of the country, we continue to come under pressure,” Gene McGillian, analyst and broker at Tradition Energy in Stamford, Connecticut, said for Bloomberg. “Gas coming out of the ground is slowly eating away the fear that we won’t have enough gas for next winter heating season.”

The US Energy Information Administration (EIA) will report on natural gas stockpiles weekly build up tomorrow, and NatGasWeather.com predicts an injection of 86-91 Billion cubic feet (Bcf), about 15 Bcf more than the 5-year average for the week.

Last week’s natural gas storage report revealed a 100-Bcf 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.

NatGasWeather.com reported on Wednesday 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 are subject to a cooler Canadian system tracking south, which drags temperatures down and generates thunderstorms and showers. However, soon after the system passes readings will climb into the 90s again. Cooling demand is expected to remain moderate-to-high this week.

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