Commodities trading outlook: crude oil and natural gas futures

WTI and Brent futures continued downwards during midday trade in Europe today. Easing risks over Iraq and a possible surge from Libya pressured crude this week. Meanwhile, natural gas futures were higher, though headed for a loss of more than 6% this week, as weather over highly-populated parts of the US cooled.

West Texas Intermediate futures for settlement in August traded for $102.18 per barrel at 13:12 GMT on the New York Mercantile Exchange, down 0.73%. Prices ranged from $102.92 to $102.14 per barrel. The US contract added 0.63% on Thursday, and so far this week has lost about 1%.

Meanwhile on the ICE in London, Brent futures due in August stood for a 0.96% drop at $107.63 per barrel. Daily high and low stood at $108.74 and $107.58 per barrel, respectively. Brent’s premium to WTI stood at $5.45, after last session’s closing margin of $5.74. The European contract added 0.36% yesterday, and has lost more than 1.5% so far this week.

“The increased production in Libya with the opening of two ports has given downward pressure to oil,” Hong Sung Ki, commodities analyst at Samsung Futures Co. in Seoul, said for Bloomberg. “The market has been removing a risk premium of about $5 a barrel since mid-June from the Iraq situation.”

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.

Libya’s output totaled 350 000 barrels per day yesterday, more than double the figure from a month ago, Mohamed Elharari, a spokesman at National Oil Corp., said yesterday, according to Bloomberg.

Meanwhile, a pipeline from the Sharara field was also reclaimed on Tuesday. The deposit has a 300 000 barrels per day capacity.

Natural gas

Front month natural gas futures, due in August, added 0.15% at the New York Mercantile Exchange to trade for $4.126 per million British thermal units at 13:13 GMT today. Prices ranged $4.116 to $4.159 per mBtu. The contract dropped 1.20% yesterday, reaching a six-month low of $4.108 per mBtu, and so far has lost more than 6.5% this week.

The US Energy Information Administration (EIA) reported on natural gas stockpiles weekly build up on Thursday, 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 had projected 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 Friday that the cool system that brought storms and rains over the eastern US will finally be tracking offshore, allowing for rising temperatures during the weekend. However, early next week another cool blast will be moving south through the Midwest and Northeast, reaching as south as Texas, and lowering temperatures to comfortable levels. Cooling demand is expected to be moderate-to-low for the next seven days.

In the 8-14 day outlook, NatGasWeather.com projected a neutral trend for the US. A cooler Canadian system is expected to penetrate deep into the South, lowering temperatures to comfortable levels, and leaving only the extreme southern and the western parts of the US subject to above-seasonal heat. The central and eastern US will see mild cool, also lowering nat gas consumption outlooks.