Commodities trading outlook: crude oil and natural gas futures

Crude oil futures were steady, as investors weighed forecasts of growing supplies in the US with geopolitical risks, stemming from Europe and Libya. The presidential election in Ukraine on May 25 will be in focus this week. Meanwhile, natural gas futures reversed earlier losses, ahead of the weekly inventories report on Thursday. Weather reports predict average temperatures this week, before a sizable warm up over the next one.

West Texas Intermediate futures for settlement in July traded for $101.94 per barrel at 13:33 GMT on the New York Mercantile Exchange, falling by 0.17%. Prices ranged from $101.87 to $102.42 per barrel. Yesterday the contract added 0.52%, reaching a monthly peak at $102.49 per barrel. Last week the US brand added more than 2% as driving season in the US draws nearer.

Meanwhile on the ICE in London, Brent futures due in July recorded a 0.16% decline to trade for $109.20 per barrel at 13:23 GMT. Daily high and low stood at $109.69 and $109.11 per barrel, respectively. Brent’s premium to WTI stood at $7.26, same as Monday’s closing margin. Yesterday the contract lost 0.35%, though it did reach a monthly high of $110.33 per barrel. On Friday the European benchmark closed for a 2.30% weekly gain with support from Ukraine and higher gasoline demand in the US.

Ukraine, Libya

One of Ukraine’s most influential people, Rinat Akhmetov, whose wealth is estimated at more than $11 billion, urged for a mass rally for peace in the east of the country. He said Ukrainians should stage “peaceful warning protests” at their workplaces from noon on Tuesday, and that actions should continue “until peace is established”, the BBC reported.

The steel magnate, who has an estimated 300 000 employees, is seen as a force to be reckoned with. His earlier actions, similar to this one, resulted in Russian separatists losing control over the town of Mariupol.

Earlier today, NATO and Ukraine said the orders by Russian President Vladimir Putin yesterday for the withdrawal of Russian troops from the border were not being carried out. Both US and European officials said no sign of movement was detected.

On Monday Mr Putin’s administration released a statement, announcing his orders for the withdrawal. It was the third such command recently, all failing to produce a confirmation by the West.

Meanwhile, Ukrainian officials asked Moscow to put off air-force military drills planned for Wednesday through Sunday in districts bordering Ukraine. The exercises will possibly fuel the confrontation between pro-Russian separatists and authorities as the government prepares to hold a presidential election on Sunday, May 25.

Last week Kiev began talks with a wide array of political and civic leaders in an attempt to ease tensions in the run up to the vote this Sunday. The round table, however, did not have representatives of the armed rebels from the eastern regions of the country, putting in question the probability of a successful resolution.

Previously, the Ukrainian provinces of Luhansk and Donetsk proclaimed independence after a “successful” referendum on May 11. Separatists said they are aiming at incorporating the regions in the Russian Federation, much like the Crimea did earlier this year.

Elsewhere, Libya is also offering some support, as fighting in Africa’s largest oil reserves holder left several dead in the weekend. The parliament offered to go into recess after voting on this years budget and until elections can be held, a statement revealed today.

However, demands of radical change made by powerful warlords indicated peace might be a long way off. Earlier protests and insurgencies had previously crippled the oil industry of the country. Libya’s output was logged at 210 000 barrels daily as of Thursday, far below the 1.4 million bpd a year ago.

“Whatever happens in Libya at the moment shouldn’t really matter, basically because things can’t get much worse than they are,” said for Reuters Jonathan Barratt, chief executive of commodity research firm Barratt Bulletin in Sydney.

US oil supplies

US oil supplies reports are also in investors’ focus, as the private American Petroleum Institute will release its reading on inventories for the week through May 16 later today, ahead of the government report on Wednesday.

A Bloomberg survey suggests commercial stockpiles were unchanged at 398.5 million barrels, while a Reuters poll projects a 1 million barrel increase for inventories to reach a new record-high standing.

Supplies at Cushing, Oklahoma, the delivery point for WTI, are speculated to have dropped again, offering some support for oil contracts.

“The U.S. recovery is gaining ground and that is positive for energy demand, and it’s drawing on inventories,” said for Bloomberg Jens Naervig Pedersen, commodities analyst at Danske Bank A/S, Copenhagen. “Demand is picking up and that is positive for prices.”

Last Wednesday, US crude oil supplies were reported to have grown for the week ended May 9th. Inventories added 0.947 million barrels to stand at 398.5 million. Meanwhile, gasoline stocks declined by 0.772 million barrels, despite a 6.4% increase in production, signaling driving season is due, and distillates also lost.

Crude oil in storage at Cushing, the delivery point for WTI, fell by another 0.6 million barrels to 23.4 million. Hubs at the Gulf Coast added 2.3 million to stand at 215.7 million barrels.

Natural gas

Front month natural gas futures, due in June, added 0.60% at the New York Mercantile Exchange to trade for $4.497 per million British thermal units at 13:35 GMT. Prices ranged from $4.430 to $4.505 per mBtu. Yesterday the contract added 1.29%, after on Friday it closed for a 2.50% weekly decline as heating season in top-consumer US nears an end.

According to AccuWeather.com New York will be warm and sunny today, temperatures ranging 62-78 degrees Fahrenheit, several degrees above average. Starting tomorrow and through to Sunday readings will drop several degrees to lows in the upper 50s and highs around 70. The cold weather will be accompanied by thunderstorms and showers in places. Next week will see more sunny weather and a significant warm up, bringing readings to range from low 60s to high 70s. Chicago will probably have to deal with a strong afternoon thunderstorm today, though temps will be above normal, ranging 62 – 77 Fahrenheit. Wednesday will bring sunny weather, but also a drop in readings. Over the following 3-4 days temperatures will not rise above 70, which is normal for this time of year. Next week is set for several-degrees higher readings, but also more cloudy and rainy weather. On the West Coast, Los Angeles will be slightly cooler than average today, with temperatures ranging 58 to 72 degrees. The next few days will be largely the same, before a warm up next week.

US natgas inventories

US natural gas stockpiles added 105 billion cubic feet in the week ended May 9th, government data showed on Thursday, which was the highest injection in almost a year. Analysts had expected a build up of around 100 billion cubic feet.

Output from shale formations will lead to record increases in stockpiles through the end of October, when heating demand kicks in, Goldman Sachs Group Inc. said in a note.

“We’ve had consecutive bearish surprises in the storage numbers,” said for Bloomberg Tim Evans, energy analyst at Citi Futures in New York. “There’s a risk that we’ll continue to probe the downside in the weeks ahead.”