Commodities trading outlook: crude oil and natural gas futures

WTI and Brent futures traded higher during midday trade in Europe today, as the US Energy Information Administration posted the weekly report on oil inventories. Key economic data from the US and Eurozone is expected later this week, with an interest rate decision by the ECB tomorrow and employment data from the US on Friday. Meanwhile, natural gas futures traded lower ahead of the US natgas inventories report due tomorrow.

West Texas Intermediate futures for settlement in July traded for $103.32 per barrel at 14:55 GMT on the New York Mercantile Exchange, up 0.64%. Prices ranged from $102.69 to $103.69 per barrel. Yesterday WTI closed for a 0.19% gain, after on Monday it lost 0.23%.

Meanwhile on the ICE in London, Brent futures due in July stood for a 0.28% gain at $109.13 per barrel at 14:45 GMT. Daily high and low stood at $109.50 and $108.81 per barrel, respectively. Brent’s premium to WTI stood at $5.81, narrowing Tuesday’s closing margin of $6.16. Yesterday the European brand closed for a 0.01% drop, after on Monday it lost a further 0.53%.

US inventories report

The weekly Energy Information Administration report on oil inventories in the US for the week ended May 23 was released today. Commercial crude oil stockpiles were revealed to have dropped 3.431 million barrels for a total of 389.5 million barrels in stock, after a 1.657 million barrel increase was logged for the week through May 23. Yesterday the private American Petroleum Institute (API) had suggested a 1.4 million barrel decline, while a Bloomberg survey projected 0.25 million more barrels.

Inventories at Cushing, Oklahoma, the largest US storage hub, and the delivery point for the New York WTI contract were shown to have lost further 300 000 barrels and stood at 21.4 million, after the previous report logged a 1.5 million barrel drop. Meanwhile, hubs at the Gulf coast also logged losses, for a massive drop of 6 million barrels and are now at 207.1 million, after a 3.1 million gain last week.

Domestic production of crude oil stood at 8.383 million barrels per day (bpd) with a decline of 89 000 bpd, after a 38 000 bpd growth for the previous week. Meanwhile, imports of crude for the week were read at 7.123 million bpd for a massive 0.686 million bpd drop, after a further 0.658 million bpd drop last week.

Motor gasoline supplies increased by 210 000 barrels and now total 211.8 million barrels, after the EIA posted a 1.8 million barrel drop last week. API had suggest a 0.8 million increase in gasoline stockpiles. Stockpiled distillate fuels added 2.012 million barrels for a figure of 118.1 million, after an insignificant decline last week. Meanwhile, API had projected a 300 000 decrease for distillates inventories.

Refinery utilization rate was reported at 90.8%, which is an increase of 0.9%, after a further 1.2% increase last week. Gasoline production was logged at 9.476 million bpd, for a drop of 89 000 bpd, after a further 66 000 bpd drop last week. Meanwhile, gasoline imports were reported at 844 bpd, which is an of increase of 119 000 bpd, after a 272 00 fall last week. Distillates production averaged 5.227 million bpd, for a growth of 237 000 bpd, after a 91 000 growth last week. Distillates imports grew by 34 000 bpd to 182 00 bpd, after a 30 000 decline last week.

Demand outlook

US preliminary nonfarm employment figures were reported today. ADP posted a standing of 179 000 new payrolls for May, ahead of the official report on Friday. The reading is well below expectations, and is much worse than the downgraded 215 000 figure for April.

Later, ISM revealed its reading on US non-manufacturing PMI for May. The standing was revealed at 56.3, exceeding expectations and increasing the speed of expansion, after a 55.2 figure was reported for April.

Earlier today, the EU reported GDP figures. Preliminary Q1 GDP growth for 2014 was logged to be in line with expectations at a 0.2% quarterly growth.

Also today, Markit posted its final reading for services PMI for May in the Eurozone, for a standing of 53.2, falling short of expectations. A figure higher than 50 means growth for the sector, while anything below means shrinking.

Both Germany and France, the Bloc’s top economies, recorded lower than before, with France still going through contraction in the sector, while Germany is still expanding.

Previously, the Eurozone posted disappointing CPI yesterday, reaffirming speculation that the European Central Bank (ECB) will indeed take steps to ease the deflationary pressure, as suggested by ECB President Mario Draghi in May. The ECB will reveal a crucial interest rate decision tomorrow.

“At the moment, we’re factoring in a little contribution to global demand for oil from Europe,” said for Reuters Michael McCarthy, chief strategist at CMC Markets in Sydney.”Technically we’re in no man’s land for both Brent and West Texas, about mid-way between support and resistance so there’s not a lot to guide us ahead of the ECB decision.”

Reports ahead

Tomorrow the Eurozone will reveal retail sales for April, and forecasts suggest an insignificant 0.1% growth on a monthly basis, after 0.3% for the previous month. More importantly, the ECB interest rate decision will be unveiled, and experts expect a decrease to 0.10%, down from 0.25%.

Also tomorrow, the US will post the weekly jobless claims report. Analysts forecast a slight increase in initial applications for unemployment benefits for the week through May 31 to 310 000, from 300 000 for the previous week. Key employment data from the US is due on Friday, when unemployment and payrolls for May will be reported.

Natural gas

Front month natural gas futures, due in July, fell by 0.24% at the New York Mercantile Exchange to trade for $4.618 per million British thermal units at 14:57 GMT. Prices ranged from $4.576 to $4.647 per mBtu, nearing late-winter levels. Yesterday the contract added 0.37%, after on Monday the blue fuel gained further 1.54%.

Last Thursday, the US Energy Information Administration (EIA) revealed that natural gas supplies in the country had gained 114 billion cubic feet for the week ended May 23, exceeding expectations of a 110 bcf increase. The injection is the biggest weekly growth since June 2009, and is 21 bcf above the average gain for the week.

The report for the week ended May 30 is due tomorrow.