Commodities trading outlook: crude oil and natural gas futures

WTI futures slid during midday trade in Europe today, while Brent added. Both contracts stood for insignificant weekly gains earlier today. Meanwhile, natural gas futures were lower, after on Thursday the US posted another sizable build for nat gas inventories.

WTI futures for September settlement stood at $101.72 per barrel at 12:42 GMT in New York today, down 0.34%. Prices ranged between $101.56 and $102.23 per barrel. The contract lost 1.09% on Thursday, erasing earlier gains for the week.

Meanwhile, Brent September contracts on the ICE in London traded at $107.21 per barrel, up 0.13%. Daily low and high were at $106.97 and $107.40 per barrel, respectively. Brent’s premium to WTI was at $5.49, after Thursday’s closing margin of $5.00. The European contract lost 0.89% yesterday, also reversing gains from earlier this week.

The US Energy Information Administration (EIA) posted its weekly oil inventories report for the seven day through July 18 on Wednesday. The log revealed a 4 million-barrel draw for commercial crude oil inventories, while gasoline and distillates added 3.4 and 1.6 million barrels, respectively.

Meanwhile, oil at Cushing, Oklahoma, the delivery point for the NYMEX contract and the largest hub in the US, was reported at 18.8 million barrels for a 1.5 million-barrel draw, and is pushing minimum operating levels, traders say.

WTI will probably advance next week, as shrinking crude supplies at Cushing support, according to a Bloomberg News survey.

Ukraine, sanctions

The US said on Thursday, that it has evidence of Russian artillery firing across the border on Ukrainian military positions. The statement added, that Russia intends to deliver more and more powerful weaponry to separatists.

The West has widely accepted that it was pro-Russian rebels, who shot down the Malaysian airliner last week, using a Buk surface-to-air missile, supplied by Russia.

The Kremlin has not yet commented on the latest accusations, but has so far denied all allegations in relation with the fighting in eastern Ukraine.

During the Crimean crisis, Russian President Vladimir Putin also frequently denied any Russian involvement, only to later admit that it was indeed Russian soldiers, who drove off the Ukrainian military and took control of the peninsula.

In separate developments, Ukrainian Arseniy Yatsenyuk resigned. It is not yet known if President Petro Poroshenko will accept the resignation.

Meanwhile, the EU is expected to unveil the expanded list of sanctioned entities today. The list will include 15 individuals and 18 companies. The measures are said to target Russian high-tech, energy and defense firms, in a move similar to that of the US last week.

Just hours before MH17 was shot down the US also widened the list of sanctioned entities. The list of companies included small-arms manufacturer Kalashnikov, Gazprombank, a leading Russian bank, as well as state-owned energy giant Rosneft.

Natural gas

Front month natural gas futures, due in August, traded at $3.824 per million British thermal units (mBtu) in New York at 12:41 GMT today, down 0.60%. Prices ranged from $3.801 to $3.862 per mBtu. The contract added 2.26% yesterday, though it reached an eight-month low of $3.744. As of Thursday the future was down some 2.5% for the week.

“There’s not a lot of fundamental support for prices,” Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York, said for Bloomberg. “We are in the peak cooling season and we have the emergence of fall-like weather.”

The EIA posted natural gas storage data yesterday, revealing an injection of 90 billion cubic feet (Bcf) for nat gas inventories in the week ended July 18. The build was not as big as some analysts expected, though it still was 34 Bcf larger than the 5-year average. Stocks were 20.2% below last year’s reading for the week.

Natural gas-market analysts at NatGasWeather.com, who predicted a build of 90-94 Bcf, say the following few weeks will also see massively larger-than-average inputs, at a time when cooling demand is supposed to be peaking. The analysts add, however, that prices are extremely oversold and are due for a rally at any time.