Commodities trading outlook: natural gas futures slide after EIA report, crude steady

WTI and Brent futures were little changed at lower levels after the US reported largely expected crude oil inventory draws. Meanwhile, natural gas futures slid under pressure from a larger-than-expected build at natgas storage hubs in the US.

On the New York Mercantile Exchange, WTI for settlement in October was down 0.64% to $94.93 per barrel at 15:05 GMT, having shifted in a daily range between $95.39 and $94.16. The US crude benchmark fell to a 1-1/2-week low of $92.68 on Tuesday, before surging 2.86% on Wednesday to settle at $95.54, the sharpest gain since August 2013.

Meanwhile on the ICE, Brent futures for delivery in the same month traded at $102.51 a barrel, down 0.25% on the day. Prices ranged between $102.95 and $101.90. The contract plunged to a 16-month low of $100.17 on Tuesday but rebounded 2.4% on Wednesday to settle at $102.77. Brent’s premium to its US counterpart widened to $7.91 from yesterday’s close at $7.23.

The US Energy Information Administration (EIA) posted its weekly report on oil stocks today. Commercial crude supplies were shown to have dropped 0.9 million barrels in the week through August 29, largely in line with estimates, logging the 10th out of 11 weeks of draws.

Supplies of crude at Cushing, Oklahoma, the biggest US storage hub and delivery point for NYMEX-traded contracts, dropped to 20.3 million barrels from 20.7m a week earlier, after reaching half of year-ago levels three weeks ago.

Domestic crude production was little changed at 8.6 million barrels per day, more than 1 million above year-ago levels. Meanwhile, net imports of crude stood at 7.2 million bpd, 1 million down from year-ago levels.

Gasoline stocks dropped 2.3 million barrels, while distillates, a category which includes diesel and heating oil, were up 0.6m.

Refineries operated at 93.3% of their operable capacity, with gasoline production gaining to ~9.6m barrels per day, while distillate fuel output was little changed at ~5.1m barrels daily.

Natural gas

Natural gas for delivery in October lost 1.20% to trade at $3.801, having ranged between $3.879 and $3.789 for the day. The power-station fuel fell by 1.1% on Wednesday, adding to Tuesday’s steep 4.3% drop, the biggest in six months.

Today’s Energy Information Administration (EIA) report, which covers the week through August 29, logged an injection of 79 billion cubic feet, beating estimates for a gain of 72-76 Bcf and continuing series of larger-than-average builds for the twentieth straight week.

Storage levels were brought to 2 709 trillion cubic feet, just 15.4% short of the 5-year average, and are headed for a near-complete replenishment ahead of winter heating season.

“Future builds will be much larger than normal,” analysts at NatGasWeather.com wrote in a note to clients today. “Our bias remains to the downside and we again expect $3.75 to be tested as massive 90-100+ Bcf weekly builds line up for weeks to come.”