Commodities trading outlook: crude oil and natural gas futures

WTI and Brent futures were slightly lower during afternoon trade in Europe today. The US oil report pressured crude contracts yesterday, while Libya plans to gradually expand output. Meanwhile, natural gas futures slid as the US posted weekly nat gas storage levels.

West Texas Intermediate futures for settlement in August traded for $102.14 per barrel at 14:03 GMT on the New York Mercantile Exchange, down 0.15%. Prices ranged from $102.19 to $101.55 per barrel. The US contract dropped 1.07% on Wednesday, after losing a further 0.6% so far this week.

Meanwhile on the ICE in London, Brent futures due in August stood for a 0.14% drop at $108.13 per barrel. Daily high and low stood at $108.37 and $107.76 per barrel, respectively. Brent’s premium to WTI stood at $5.99, same as last session’s closing margin. The European contract dropped 0.61% yesterday, and has lost over 2% this week so far.

“Yesterday’s weekly oil inventories showed lower-than-expected gasoline demand,” Michael Poulsen, analyst at Global Risk Management Ltd. in Middelfart, Denmark, said in a report, cited by Bloomberg. It’s “a surprise since the summer driving season is presently peaking.”

Oil inventories

The US Energy Information Administration (EIA) posted its weekly oil inventories report for the seven day through July 4 yesterday. The log revealed a 2.370 million-barrel draw for commercial crude oil inventories, gasoline inventories added 0.579 million barrels, while distillate fuels stockpiles levels increased by 0.227 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.

“Inventories at Cushing increased unexpectedly and WTI is reacting to that,” said for Bloomberg Amrita Sen, chief oil markets analyst at consultant Energy Aspects Ltd. “The stockpile increase came as a result of reduced flows out of Cushing on the Seaway pipeline following a two-day outage.”

Libya

Libya will begin to gradually increase exports through the two reclaimed terminals to avoid disrupting oil markets, Samir Kamal, the nation’s governor to OPEC, said yesterday according to Bloomberg. The National Oil Company was told to start marketing supplies from the two terminals earlier this week.

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.

Meanwhile, a pipeline from the Sharara field was also reclaimed on Tuesday. The deposit has a 300 000 barrels per day capacity, which is the equivalent of Libya’s total production last month.

Natural gas

Front month natural gas futures, due in August, dropped 1.01% at the New York Mercantile Exchange to trade for $4.128 per million British thermal units at 14:40 GMT today. Prices ranged $4.128 to $4.193 per mBtu. The contract dropped 0.81% yesterday, and so far has lost more than 5% this week, reaching a six-month low of $4.129 per mBtu.

The US Energy Information Administration (EIA) reported on natural gas stockpiles weekly build up today, to reveal a 93 Billion cubic feet (Bcf) gain for inventories, 21 Bcf more than the 5-year average gain for the week. NatGasWeather.com had predicted an injection of 86-92 Bcf, while a Bloomberg survey put the figure at 89 Bcf.

Levels remain 24.4% below readings from last year, but confidence that stockpiles will replenish completely before the start of heating season in November grows.

“The weather’s been mild and traders have been dumping their bullish gas positions,” Phil Flynn, senior market analyst at Price Futures Group in Chicago, said for Bloomberg ahead of the report. “Storage has been growing at a rapid pace week after week.”

NatGasWeather.com reported on Thursday that the southern and western US will be moderately warm for the next seven days, with frequent temperature peaks into triple-digit range. 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 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.