Commodities trading outlook: natural gas and crude oil futures

Todays European trading session saw West Texas Intermediate and Brent both claw their way up from last sessions losses on the bearish US supplies report, with firm support coming from Ukraine. Meanwhile, natural gas kept earlier gains on reports for dropping temperatures in the US, beating bearish forecasts for supplies.

WTI futures due in June traded at $101.74 per barrel at 12:13 GMT on the New York Mercantile Exchange, a growth of 0.30% since yesterday, the high and low of the day stood at $101.91 and $101.48 per barrel, respectively. US crude lost 0.30% in the last session and a further 1.83% on Tuesday, on bearish news from China.

Meanwhile on the ICE, Brent futures for June kept steady to register a price of $109.35 per barrel at 12:13 GMT, adding 0.22% for the session so far. Daily prices ranged from $109.07 to $109.47 per barrel. The European benchmark traded at a premium $7.61 to its US counterpart.

Later today is due this months report on durable goods orders for the US. Forecasts put growth at 2.0% for March, down from 2.2% for February, while core durable goods orders are set to grow by 0.6%, up from Februarys reading of a 0.1% rise.

Yesterday the Energy Information Administration reported crude oil supplies in the US were at their highest level on record, pushing hard on crude prices. Inventories rose by 3.524 million barrels in the week through April 18th, to reach 397.7 million, exceeding expectations of a 2.3-million barrels increase. Crude imports and domestic production outpaced refinery utilization rate, even though it also picked-up pace, to score 91.0%, up from last week’s 88.8%.

Motor gasoline and distillates figures also fanned significantly negative sentiment, with gasoline inventories having dropped by 0.274 million barrels for the week, far below the expectation of a 1.713-million decline, while distillate fuels gaining 0.597 million barrels in supplies, in contrast to a forecast of a 0.463-million decline.

Earlier in the week, the US benchmark was down on news that manufacturing activity in China registered a lower-than-expected PMI. According to HSBC’s preliminary report released on Tuesday, the Chinese manufacturing PMI recorded at 48.3 for April, in contrast with a 48.4 forecast. This translates to a slightly lower-than-before pace of slowdown in the world’s second oil consumer, but also boosts negative sentiment, as the reading is worse than the forecast and is still well-below the “50” contraction-expansion figure.

Ukraine

The crisis in Ukraine still offers sizable support to oil prices. Yesterday the interim government resumed its “anti-terrorist” operation in the East, while the US began preparations for military exercises in the Baltic states, planned for the following months. Russian foreign minister, Sergei Lavrov, kept Kremlin’s firm tone, saying that “if the interests of Russians have been attacked directly… [Moscow will] respond in full accordance with international law.”

The US and EU had asked Moscow to persuade pro-Russian separatists to leave occupied buildings and to make amends towards deescalating tensions in Ukraine, through talks in Geneva last week. On Tuesday, however, American president Obama said the Kremlin had failed to halt militants, and shows no intention of following the Geneva agreements.

Meanwhile, the UK reported that Russian aircraft were detected approaching northern Scotland, with the Netherlands, Denmark and the United Kingdom all sending jets to escort the approaching aircraft away from their airspace.

Natural gas

Prices for natural gas futures due in June rose 1.22% today on the New York Mercantile Exchange, to stand at $4.805 per million British thermal units at 12:14 GMT. The session marked the highest since winter price at $4.818 per mBtu. Over the previous five sessions natural gas added more than 4.5%.

NatGasWeather.com reported that the Northeast and Great Lakes areas will be experiencing below-normal temperatures today and in the coming days, while the southern and central states will be warming-up, before a larger cool system drags readings down for most of the central and eastern US during the weekend and into next week. The West will also see a decrease in temperatures, as Pacific storms move inland. Overall, the weather in the following days will buff bullish outlooks on natural gas, as readings remain at below-normal to normal.

AccuWeather.com reported that today, April 24th, will be chilly for New York with temperatures dropping to as little as 43 degrees Fahrenheit, 5 below average, before an expected warming for the weekend and into next week, though temps will remain 2-3 degrees below-average. Boston is set for a slightly cooler-than-normal day, with readings between 40 and 61. Tomorrow will bring a warm-up, before a colder Saturday, with 5-below average temperatures. Los Angeles will see slightly warmer than average weather today, before a medium cool-down through Friday and the weekend, when readings might drop as low as 54.

Later today the Energy Information Administration will release its weekly report on natural gas supplies in the US. Forecasts put the gain at 44 billion cubic feet, up from last week’s 24 bcf rise, climbing to 894 bcf. The proposed increase boosts bearish sentiment for natural gas. However, although improving, the figure is still 51.9% below the 5-year average and 47.4% behind readings from a year ago.