Commodities trading outlook: crude oil and natural gas futures

Crude oil gained on news that the US will be building up gasoline reserves in the Northeast. Furthermore, West Texas Intermediate added as expectations of further declines in US inventories stoked bullish sentiment. Brent was supported by unimpressive Libyan output and by the crisis in Ukraine. Meanwhile, natural gas futures were steady after dropping more than 9% over the last five sessions, as the overall warming over the last week makes possible greater gains in inventories.

West Texas Intermediate futures for settlement in June traded for $101.29 per barrel at 12:56 GMT on the New York Mercantile Exchange, adding 0.70%, daily prices between $100.36 and $101.44 per barrel. Yesterday the contract added 0.60% on Ukraine, after on Friday the it closed for a weekly gain of 0.24%, boosted by lowering supplies in the US.

Meanwhile on the ICE in London, Brent futures due in July recorded a 0.19% decline to trade for $107.99 per barrel at 7:27 GMT, prices ranging from $107.44 to $108.29 per barrel. The European brand added 0.64% on Monday. Brent’s premium to WTI July contracts stood at $7.39, behind yesterday’s closing margin of $7.85.

The U.S. Energy Secretary Ernest Moniz told Reuters that the reserve will be buying gasoline to cover hurricane season in the Northeast. Authorities plan to hold as much as 1 million barrels at two sites of 500 000 each. The emergency reserve purchases are planned for late July – early August.

US data on oil supplies will be revealed today, as the private American Petroleum Institute will share its weekly report late in the day, ahead of official data on Wednesday. A Reuters poll suggests commercial crude oil reserves have remained unchanged for the week through May 9th, while a Bloomberg survey projects a 1 million barrel decline in inventories.

Last week the report showed stockpiles had eased off from all-time-high figures, though they still remain at very high levels at 397.6 million barrels.

Elsewhere, Libya is opening western oilfields and pipelines, after being closed by protests. However, the output remains below expectations, boosting Brent, and the two major oil-loading ports in the country remain under rebel control. A breakthrough in negotiations could mean a long retreat for crude. As of yesterday, crude oil output in Libya is at 235 000 barrels per day, and the country has a potential of 4 million barrels daily.

Iran is also set for improving export outlooks, with high-level talks in Vienna today, aiming to negotiate a softening of sanctions.

Ukraine

Fears over a Russian intervention in Ukraine kept a floor under prices, as the eastern Ukrainian regions of Donetsk and Luhansk announced a sound victory in the independence vote on Sunday. Moscow said it wishes to see the “will of the people be implemented,” however it has not commented on the vote organizers’ remarks, who called for Russia to annex the regions, much like it did with Crimea earlier this year. Rebel leaders said they will hold a vote on joining the Russian Federation, the BBC reported.

The West and Ukraine have widely condemned the referendum, dismissing its legitimacy. The EU expanded the list of sanctioned individuals and companies by 15 names yesterday, including 2 Crimean energy firms and close allies of Russian President Vladimir Putin.

Ukraine is to hold much-awaited presidential elections on May 25th, which are expected to bring stability and reinstate legitimacy of the authorities. Last week Mr Putin signaled a turn in Kremlin’s course, after backing the vote, calling it a “step in the right direction.” However, Moscow has done little to visibly support the election, and pro-Russian rebels say they will boycott the vote.

Natural gas futures

Front month natural gas futures, due in June, added 0.09% at the New York Mercantile Exchange to trade for $4.438 per million British thermal units at 13:00 GMT. Prices ranged from $4.400 to $4.469 per mBtu, nearing the lowest level in a month. Yesterday the contract lost 2.14% on expectations of milder weather and growing supplies in top-consumer US, after losing a further 6.82% over the previous four sessions.

Weather reports project a stormy few days for the Northeast, with showers and thunderstorms, though some regions will be warming to well-above average. Over the second half of the week the strong storm will be moving through, bringing more heavy rains and possibly floods. The Midwest will see various patterns over the following days, with warmth and humidity in the lower Great Lakes area and the Ohio valley, while the Northern Plains will be cool and dry. A lower pressure system will keep the possibility of scattered showers and storms throughout the period. The West Coast will be very hot from today through to Friday, with record-pushing temperatures everywhere from Seattle to Los Angeles. In combination with low humidity, the heat is forecast to raise fire threats.

According to AccuWeather.com New York will be cloudy and rainy today, though temperatures will remain in average range of 54 to 70 degrees Fahrenheit. Over the following days the slowly-moving storm will still be producing rains and thunderstorms over the region, with overall normal readings. Boston will be cooler today with highs below 56 degrees, and lows at mid 40s. Rainy weather will remain through the week, with highs between 63 and 70 degrees, and lows at mid 50s. Chicago will also be rainy and cloudy, though there temperatures will be slightly lower than normal, ranging 46-64 degrees. Starting tomorrow, however, readings will plummet to range 42-55 over the next few days, about 10 degrees below average. On the West Coast, Los Angeles will be very hot, with forecasts of 97-99 degree highs through to Friday, 25 above normal. Seattle will also be significantly hotter, with temperatures 15 to 20 degrees above average, reaching as high as 82 degrees Fahrenheit.