Commodities trading outlook: crude oil and natural gas futures

US crude traded near yesterdays close at midday in Europe, largely keeping gains on declining supplies in the US. Russian President Vladimir Putin demonstrated a softening tone over the crisis in Europe, pressuring oil prices, though his remarks were checked by the determination of the rebel insurrection in eastern Ukraine. Meanwhile, natural gas was also steady, keeping Thursdays losses on account of growing stockpiles in top consumer US.

West Texas Intermediate futures for delivery in June traded for $100.63 per barrel at 11:53 GMT on the New York Mercantile Exchange, declining by 0.14%, daily prices varied between $100.33 and $100.93 per barrel. Yesterday the US crude benchmark added 1.28% after a bullish report on stockpiles in the US, reaching a weekly high of $100.99 per barrel.

Rebel activists were quoted by Russian news agency RIA Novosti as saying they will go ahead and hold the planned independence referendum, despite Russias Vladimir Putin urging a delay, the BBC reported. “The referendum will take place on 11 May. We are getting ready, ballot papers are being printed, everything remains in force. Nothing will change, it will not be delayed,” pro-Russian rebels in Luhansk were quoted as saying.

Yesterday, Russian President Vladimir Putin made some steps towards reducing tensions in eastern Ukraine as he proposed separatists postpone the planned independence referendum in Donetsk and Luhansk regions. President Putin went on to add that the presidential election due on May 25th is a step in the right direction, though previously Russian Foreign Minister Sergei Lavrov urged the vote be put-off, in light of the violence in the country. The Kremlin also announced that it is withdrawing troops away from the border, though any Ukrainian or NATO officials have yet to confirm.

Previously, confrontations between the military and rebels failed to produce a decisive outcome. Sloviansk remains in militant hands, though blockaded, after a bloody battle earlier this week, while many towns in the Donetsk region are also occupied by separatists, who don’t recognize Kiev’s authority.

US supplies

The government report on US oil inventories for the week ended May 2nd revealed stockpiles of crude oil had backed off from all-time high figures for the last two weeks. Supplies stood at 397.6 million barrels, registering a decline of 1.781 million barrels. Motor gasoline supplies added 1.608 million barrels, while distillates inventories contracted by 0.447 million barrels.

Crude oil in storage at Cushing, the delivery point for WTI, fell by 1.4 million barrels to 24.0 million. Hubs at the Gulf Coast slightly decreased inventories to register 213.4 million barrels for the week.

China data

China also offered support for crude oil, as a report earlier today showed foreign trade had improved significantly in April. Both exports and imports beat expectations of contraction to mark slight gains at 0.9% and 0.8%, respectively. Trade balance had also improved on forecasts to settle at a $18.45 billion surplus, more than double that of March.

More importantly, crude oil imports had increased by 22.4% on a monthly basis to average at 6.78 million barrels daily. Crude imports also exceed figures from a year ago by 11.5%.

“People have been bearish on China, so if we have any good news out of China it should at least provide some support,” said for Reuters Tony Nunan, oil risk manager at Mitsubishi Corp in Tokyo. “Weve seen a lot of negative headlines about China, but as long they can show a decent growth … it’s supportive for the oil market.”

China accounts for 11% of the world’s oil consumption, and negative industrial outlooks pressure crude contracts. Previously, HSBC’s final reading for April’s manufacturing PMI of China put the figure at 48.1, marking the fourth month in a row to register a contraction in factory activity. The reading is also behind the preliminary standing at 48.3, and below the government’s 50.3 index, which also fell short of expectations.

Natural gas futures

Front month natural gas futures, due in June, added 0.11% at the new York Mercantile Exchange to trade for $4.745 per million British thermal units at 11:55 GMT. Prices ranged from $4.716 to $4.754 per mBtu. Yesterday the contract lost 1.23% on forecast supplies in the US, while it added 2.37% on Tuesday.

Natgasweather.com reported that the mid-Atlantic states, alongside the Southeast and regions of the Northeast and Midwest will be warming nicely the next few days, as the system of high pressure over the South Plains moves eastward. Meanwhile, a period of exciting weather will be setting roots over the central states, as a system moves in from the West. Over the following weeks a set of weak cold blasts will be penetrating from Canada to reach deep into the Southeast, though temperatures will not be lowered by much. On the Pacific Coast, temperatures will be on-par with the average for this time of year. Next week is projected to bring more record-breaking heat for the region, lifting power demand expectations.

According to Accuweather.com, New York will be cloudy and rainy for the following days. Temperatures will range 52 to 64 degrees Fahrenheit, before a warm-up during the weekend and into next week, when readings are expected top 80 degrees. The weather in Boston will also be cloudy, with forecasts of 50-66 degrees today and 52-58 degrees on Friday, slightly below average. Starting on Saturday, however, readings will rise to push 80 early next week. Chicago is set to be warm today, with temperatures forecast exceed 80 degrees Fahrenheit, 10 above the average high for the day. Over the weekend the weather will be cloudy, though still warmer than normal. Early next week, however, readings will drop to several degrees below average, as cool air from Canada tracks south. On the West Coast, Los Angeles will experience normal temperatures today, and through the weekend, with highs at 72-75 and lows around 55-57. Next week another heatwave is expected to push readings in the high 90s.

Later today the report on natural gas stockpiles in the US for the week ended May 2nd is due. Expectations put gains at 71 billion cubic feet, down from last week’s 82 bcf increase. The forecast slowdown is attributed to the slightly cooler weather over the eastern states last week, in addition to a greater power demand on the West Coast, where a heatwave pushed readings up to record values.