Commodities trading outlook: natural gas, crude oil futures

West Texas Intermediate crude fell for a fourth day and Brent hovered near a five-month low as demand for petroleum products in the US slid to the lowest since June, while fears of economic slowdown in China added to global demand fears. The market was further pressured amid prospects for a jump in Libyan oil exports, but losses were capped by a drop in nationwide US crude inventories, while supplies at Cushing slid to a four-year low. Meanwhile, natural gas futures rose ahead of a government report that may show stockpiles declined at a faster than the five-year average pace, while supplies are already at the weakest level for this time of the season since 2003.

On the New York Mercantile Exchange, WTI crude for delivery in May fell by 0.24% to $99.38 per barrel by 13:00 GMT, having shifted in a daily range between $99.75 and $99.07 per barrel. The contract slid by 0.12% on Wednesday, a third straight session of losses, and settled at $99.62 per barrel, the lowest since March 25th.

Meanwhile on the ICE, Brent futures for settlement in the same month were up 0.25% at $105.06 per barrel. Prices held in a daily range between $104.45 and $105.41 per barrel. The European crude benchmark lost 0.8% on Wednesday, having fallen to a five-month low of $103.95 per barrel, and settled at $104.79, the lowest since early November. Brent traded at a premium of $5.35 to its US counterpart after it closed at $5.17 on Wednesday, the narrowest since October 2nd.

Oil prices remained pinned down amid worries of softening demand in the world’s top two consumers. Government data showed early on Thursday that activity in China’s services sector grew at a slower pace in March. The National Bureau of Statistics’ Chinese Non-Manufacturing Purchasing Managers’ Index slid to 54.5 from 55.0 in February.

The market was also pressured after a gauge of consumption in the US slid to the lowest in ten months. The Energy Information Administration reported yesterday that US refineries supplied 18.2 million barrels a day of fuel in the week ended March 28, the lowest since June.

Further losses however were capped after the government agency announced on Wednesday an unexpected decline in US crude oil inventories, the first in eleven weeks. The report showed that US crude inventories fell by 2.38 million barrels to 380.1 million in the seven days through March 28th, defying the median forecast of seven analysts surveyed by Bloomberg for a 2.5-million jump.

The oil market, and particularly the Brent crude benchmark, were heavily pressured after the announcement a rebel group might reach an agreement with the Libyan government to reopen vital eastern oil export terminals with a total capacity of 600 000 barrels per day, spurring hopes for an end to the standoff, which has crippled the nation’s oil output, its main source of revenue. A senior rebel leader told Reuters on Tuesday that the reopening could come through within days.

Meanwhile, on the New York Mercantile Exchange, natural gas for delivery in May traded at $4.403 per million British thermal units at 13:01 GMT, up 0.88% on the day. Prices held in a daily range between $4.418, and $4.312 per mBtu. Yesterday, the energy source added 3%, rebounding from more than two-month lows amid speculation for a much-larger-than the five-year average inventory drop.

A government report later today may show a US inventory decline of 74 billion cubic feet in the week ended March 28, according to the median of 11 analyst estimates in a Bloomberg News survey. This compares to a much smaller five-year average drop, which is 8 bcf. The EIA is scheduled to release its weekly US gas storage report at 14:30 GMT.