Commodities trading outlook: crude oil and natural gas futures

Both WTI and Brent futures were steady today, as investors weighed US data with the conflict in Ukraine, where on Monday deadly fighting for the airport in Donetsk erupted. Durable goods orders in the US for April were reported today, to reveal still growing orders, though at a much slower pace. Later this week more economic figures for the US will be reported, with expectations of improving readings on the worlds top oil-consuming economy. Meanwhile, natural gas futures traded lower, after muted activity on Monday, when a holiday in the US shut major exchanges.

West Texas Intermediate futures for settlement in July traded for $104.30 per barrel at 12:57 GMT on the New York Mercantile Exchange, down 0.05%. Prices ranged from $103.92 to $104.50 per barrel, nearing a three month peak. Yesterday the US benchmark added 0.03% with muted trade, due to a US and UK holiday. Last week the contract gained 2.71%, after the Energy Information Administration in the US revealed supplies of crude had decreased by almost 8 million barrels.

Meanwhile on the ICE in London, Brent futures due in July recorded a 0.01% loss to trade for $110.31 per barrel at 12:48 GMT. Daily high and low stood at $110.80 and $109.75 per barrel, respectively. Brent’s premium to WTI stood at $6.22, widening last session’s closing margin of $5.94. Yesterday the European dropped 0.20%, after last week the contract logged a 0.71% increase, reaching an 11-week peak of $111.04 per barrel in the meantime.

Ukraine

Ukraine saw an escalation of fighting on Monday, as militants attacked the airport in Donetsk, and authorities soon retaliated, employing airstrikes and heavy weaponry. The press office of the “Donetsk People’s Republic” said for Russian news agency ITAR TASS that 24 injured rebels were killed while being transported, when the truck they were in came under fire. The mayor of Donetsk reported there have been civilian casualties and urged the populace to stay indoors.

Earlier today, Ukraines interim Interior Minister Arsen Avakov said “The airport is under our full control. The enemy suffered heavy losses. We have none,” the BBC reported.

The attack came a day after the presidential election took place, with a clear winner in the first round. Former foreign minister and billionaire Petro Poroshenko received about 54% of the vote. Turnout was probably very poor, about 50%, with the separatist provinces of Luhansk and Donetsk boycotting the vote, and forcefully closing all voting stations. The airport attack was probably in address to the new president’s plans to visit the Donbass soon.

Mr Poroshenko said he will not allow the Donbass to be “turned into Somalia,” and dismissed any talks with the armed rebels. He vowed to press on with the “anti-terrorist” operation, and said that it “should and will be over in a matter of hours.” He added that for any peaceful resolution to be lasting, there must be cooperation with Russia, and said he is ready to work with the Kremlin. Meanwhile, Russian Foreign Minister Sergei Lavrov also said Moscow was ready to work with the new Ukrainian president, but insisted military actions must cease.

Elsewhere, Libya also offered further support, after rebels leaders spoke of reversing the deal to reopen two major oil-exporting terminals in the country. Libya’s output was at 160 000 barrels per day as of yesterday, revealed Mohamed Elharari, a spokesman for state-run National Oil Corp.

Libya is facing civil strife, as fighting between rival parties left scores dead last week. The government scheduled general election for June 25, in an attempt to quell unrest, but to no avail. Islamist and other armed brigades control swathes of the country and continue to fight.

Libya holds Africa’s largest oil reserves and can potentially produce more than 4 million barrels daily.

US economy

Today the US, which consumes 21% of all oil in the world, revealed durable goods orders for April. Total orders added 0.8% on a monthly basis, beating expectations of a 0.5% fall, while core orders, which exclude transportation items, logged a 0.1% growth, short of expected 0.3% gain. Last month total orders registered an upward-revised 3.6% monthly growth, while core goods had added 2.9%.

Later today, Markit will post its preliminary services PMI for May. Analysts forecast a slightly quicker expansion for the services sector, which accounts for almost 80% of US GDP, with a figure of 55.6, up from 55.0 for April.

Lastly, the Conference Board (CB) will reveal its consumer confidence index for May. It is a leading indicator for consumer spending, which generates about 70% of US GDP. Analysts predict the CB will report an improving consumer sentiment, logging the index at 83.0, up from 82.3 for April.

On Thursday the US reveals quarterly GDP growth. Analysts expect a slight contraction after the brutal winter halted economic activities for a prolonged period. Also on Thursday, pending home sales for April in the US will be reported, with forecasts of small gains.

On Friday, a report on personal income and spending for April in the world’s top economy will be released. Economists project a minor monthly increase in both.

Elsewhere, on Wednesday the EU will post data. Consumer confidence for May is projected to be slightly improving, but still negative at -7.0, up from April’s -8.6. Industrial sentiment, however, is forecast to be worsening at -4.0, from -3.6 for the previous month.

The sluggish recovery in the EU, as seen through a number of mediocre or outright bad figures recently, prompted ECB President Mario Draghi to suggest easing might be due.

“If policy measures are announced to help boost growth in the euro zone, that should have a positive impact on Brent prices and also spill over to support WTI,” said for Reuters Ben Le Brun said, market analyst with OptionsXpress.

Natural gas

Front month natural gas futures, due in June, fell by 0.84% at the New York Mercantile Exchange to trade for $4.368 per million British thermal units at 12:59 GMT. Prices ranged from $4.360 to $4.406 per mBtu. Last week the blue fuel lost 0.01%, nearing a two-month low at $4.349 per mBtu.

According to AccuWeather.com New York will be very hot today, with temperatures ranging 62 to 78 degrees Fahrenheit, several above average. Tomorrow readings will drop 10 to 15 degrees and an afternoon thunderstorm is possible. The slightly below-average temps will remain through to Friday, and the weather will normalize into next week, with June heralding the start of the hot season.

Boston will be cloudy and cooler than normal today, with temperatures ranging 46 to 67, several below average. Tomorrow will bring a sizable decline in readings, with highs in the mid 50s. Starting on Thursday, readings will begin climbing to be near-normal during the weekend, with temps ranging 52-65 degrees, which is still a few short of average. Next week will probably bring a sizable warm up, to mark the beginning of the Summer months.

The weather over Chicago will be somewhat strange today, with temperatures several degrees above normal at 59-78 today, though with a strong thunderstorm expected. A significant cooldown is forecast for tomorrow, with readings dropping 10 degrees to a few below average. Over the weekend the weather will be sunny and readings will range 60 to 77, or several degrees above usual.

On the West Coast, Los Angeles will be slightly warmer than usual throughout the whole week, with highs in the upper 70s and low 80s. Up North, Seattle will be mostly cloudy with temperatures ranging high 40s to mid 60s up to the weekend, when sunny and warm weather will bump readings to a comfortable 50-75 range.

Last Thursday, the EIA released its weekly report on natural gas storage levels in the US for the week through May 16. The report showed that supplies of the blue fuel had added 106 billion cubic feet (bcf), exceeding expectations of 100-103 bcf growth. The figure records the biggest weekly gain since June 2013, and is 16 bcf above the 5-year average increase for the week.