Commodities trading outlook: crude oil and natural gas futures

WTI and Brent prices were higher during midday trade in Europe today, as the US posted weekly readings on oil inventories. Meanwhile, natural gas prices were also on the upside, as traders weigh projections for natgas stocks build, due to be reported tomorrow.

WTI futures for September delivery on the NYMEX traded at $97.95 per barrel at 14:44 GMT, up 0.59%. Prices ranged from $97.33 to $98.02 per barrel. The contract dropped 0.93% yesterday, reaching a seven-month low at $97.00.

September Brent on the ICE stood at $105.29 per barrel, up 0.65%. Daily low and high were at $104.63 and $105.33 per barrel, respectively. Brent’s premium to WTI was $7.34, after Tuesday’s closing margin of $7.23. September Brent lost 0.76% yesterday to record a 13-month low at $104.07 per barrel.

The US Department of Energys statistical arm, the Energy Information Administration (EIA) posted its weekly report on US oil inventories today. The report covers the week through August 1, and revealed a 1.8 million-barrel draw for crude stockpiles. The industry-funded American Petroleum Institute (API) had reported a 5.5m draw on Tuesday, while Bloomberg and the Wall Street Journal were accurate in their suggestions.

Supplies at Cushing, Oklahoma, the largest storage hub in the US and the delivery point for the NYMEX contract, had logged minor gains to stand at 18.0 million barrels, after reaching a six-year low of 17.9m last week.

Gasoline stocks lost 4.4 million barrels, EIA reported. The stark drop comes at peak US driving season and compares to a 0.3m gain last week. The API had reported a 3.6m draw, while Bloomberg and the Wall Street Journal had suggested little change. Meanwhile, distillate fuels, which include diesel and heating oil, were down 1.8 million barrels.

Crude oil production was unchanged at 8.4 million barrels per day (bpd). Meanwhile, refinery utilization rate slightly decreased to 92.4%, while gasoline production was slightly higher at 10m bpd. Distillates output was slightly lower at 4.8m bpd.

Ukraine, Middle east

On the geopolitical side of pricing, Polish Foreign Minister Radoslaw Sikorski suggested Russia was preparing to invade Ukraine, in light of new combat-ready Russian troops massing near the border. The statement boosted safe have items and offered some support to oil, as Russia, the worlds largest energy exporter, comes under more intense international pressure.

Meanwhile, Iraq and Libya saw little developments today, with secure and steady output from both Iraqs south, home to 75% of exports, and the Kurdish-controlled northern oilfields. Libyan authorities, meanwhile, reported progress on the work to restart operations at the two eastern oil-exporting ports, which were handed over to them by rebels last month.

Natural gas

Natural gas futures for delivery in September traded at $3.913 per million British thermal units (mBtu), up 0.41%. Prices ranged from $3.876 to a two-week high of $3.932 per mBtu. The contract added 1.64% on Tuesday after a further 0.95% gain on Monday.

“The only weather reason prices should be supported is because Texas and California could remain quite hot,” analysts at NatGasWeather.com wrote in a note to clients today. Bearish sentiment “could increase at any time as market participants receive word cooler than normal temperatures are likely to return to the northern US.”

Natural gas prices were indeed supported by seasonal temps across the southern and southwestern states, generating moderate cooling demand. The northern states however, are still cooler than normal, allowing for considerably lower cooling demand and more sizable inventory build ups.

A Bloomberg survey projected this week’s report, which will cover the week through 1 August, will reveal ~86 billion cubic feet (Bcf) of natural gas were added to stockpiles. NatGasWeather.com suggested an injection of 80-84 Bcf, in comparison with a 49 Bcf average gain for the past five years.