Commodities trading outlook: Crude oil and natural gas futures

Brent remained near $110 per barrel during midday trading in Europe, supported by Ukraine, while West Texas Intermediate made slight gains. Natural gas rallied on expected higher fuel consumption in the US, with both heating and cooling demand forecast to be above-average.

West Texas Intermediate futures for settlement in June traded for $101.14 per barrel at 13:14 GMT on the New York Mercantile Exchange, adding 0.54%. Daily high and low stood at $101.52 and $100.49 per barrel respectively, reaching the lowest intra-day price in three weeks. Over the last four sessions the US crude benchmark lost 2.95%, pressured by US oil inventories.

Meanwhile on the ICE, Brent futures due in June registered a 0.05% loss to trade for $109.53 per barrel at 13:14 GMT, prices ranging from $109.41 to $110.20 per barrel. During Friday’s session the European brand reached the highest price level since early March at $110.63 per barrel. Brent’s premium to WTI stood at $8.65.

The conflict in Ukraine is brewing with ever-greater intensity. Earlier today Hennadiy Kernes, Mayor of the city of Kharkiv, which is one of the bastions of pro-Russian sentiment, was shot in the back while jogging, motives and perpetrator remain unknown. Previously, on Friday the confrontation reached a new extreme, when a group of international observers was abducted by separatist militants near the town of Sloviansk. The group includes nationals from Germany, Poland, the Czech Republic, Denmark and Sweden. Yesterday, masked and armed men marched the captured before cameras, in a move described by Germany as “revolting”. The separatists later released one of the captives, due to a medical condition requiring treatment, but also said they had no intention of freeing the others. An operation to negotiate the release of the observers is underway.

The US and EU have condemned the evident lack of commitment from the Kremlin in implementing the agreed-upon measures in Geneva. Western diplomats will hold high-level talks today, with the goal of agreeing further and tougher sanctions against Moscow. “Later today, there will be an announcement made, and I can tell you that it builds on the sanctions that are already in place. We are going to be moving forward with an expanded list of individuals and companies that will be affected by sanctions,” US President Obama said in Manila, the Philippines, earlier today.

Last week saw the resumption of the Ukrainian government’s “anti-terrorist” operation against pro-Russian separatists in the eastern regions of the country. The pro-western authorities in Kiev reported that they had killed a number of militants, which prompted the Kremlin to order military drills and exercises near the Russian-Ukrainian border, in a sharp escalation of the tone.

Elsewhere, oil prices are finding significant resistance in the form of all-time-high crude inventories and lower-than-expected gasoline demand in the US. Despite the higher refinery utilization rate, which stood at 91.0%, crude oil stockpiles rose by 3.524 million barrels in the week ended April 18th, to reach 397.7 million, exceeding expectations of a 2.3-million barrels increase. Motor gasoline and distillates readings also fanned significant negative sentiment, gasoline inventories decreasing by 0.274 million barrels for the week, far below expectations of a 1.713-million decline, while distillate fuels gained 0.597 million barrels in supplies, in contrast to a forecast of a 0.463-million drop.

Natural Gas

Natural gas futures due in June added 2.47% at the new York Mercantile Exchange by 13:17 GMT, to trade for $4.773 per million British thermal units, prices ranging from $4.648 to $4.785 per mBtu. Friday saw a daily low of $4.644 per mBtu, the deepest trough in 10 days. The contract has lost 1.89% since the report on stockpiles in the US on Thursday.

Natgasweather.com reported that the severe Spring storm, which triggered deadly tornadoes over the weekend, will dominate the weather over much of central US, keeping temperatures low. Over the course of the week a cold weather system from Canada will very slowly move through the Midwest, towards the eastern and southern states, prolonging the period of cold for much of the US. The East will see a couple of days of near-normal temperatures, before the arrival of the cooler Canadian system. The Pacific coast is set for a completely different situation, with readings projected to exceed the average by quite a significant margin, and for an extended period. Overall a slightly higher-than-average consumption of natural gas for the next few days is forecast, with a cooler weather over much of central and eastern states, while the heatwave over the West will induce higher power demand as air-conditioners are put to work.

Accuweather.com put readings for New York at 49 to 64 degrees Fahrenheit for today, April 28th, on par with the average. Tuesday and Wednesday will see a strong cold blast, readings staying mostly below 53 degrees, before a significant warm-up beginning Thursday. Chicago is set for a stormy few days. Monday will be cooler than normal, though readings will not drop below 50, while Tuesday will see periods of warmth, reaching as much as 64 degrees, before further cold blasts starting Wednesday. In the West, Los Angeles will be heating-up today, temperatures rising as high as 78 Fahrenheit. Beginning on Tuesday readings for the next few days are projected to top 90 degrees, or 20 above average.

Last Thursday the Energy Information Administration released its weekly natural gas storage report for the week ended April 18th, which revealed a growth of 49 billion cubic feet in inventories, beating forecasts of a 44 bcf gain. It exceeded the previous week’s figure of a 24 bcf increase, bringing the volume of natural gas in storage to 899 bcf. Improving supplies push down on the blue fuel.