Commodities trading outlook: crude oil and natural gas futures

WTI and Brent futures were lower during afternoon trade in Europe today, ahead of US oil reports. Fighting continued across Iraq, with militants claiming the countrys biggest oil refinery. Meanwhile, natural gas futures were higher, after the recent slump on speculation that the US will see cooler weather.

West Texas Intermediate futures for settlement in August traded for $105.91 per barrel at 13:40 GMT on the New York Mercantile Exchange, down 0.18%. Prices ranged from $105.25 to $106.38 per barrel. The US contract dropped 0.62% yesterday, after adding about 0.6% last week.

Meanwhile on the ICE in London, Brent futures due in August stood for a 0.27% drop at $113.81 per barrel at 13:41 GMT. Daily high and low stood at $114.37 and $113.55 per barrel, respectively. Brent’s premium to August WTI stood at $7.90, after Monday’s closing margin of $7.95. The European contract declined by 0.60% yesterday, after adding more than 2% last week.

“Iraq is still the talk of the town, even though the situation on the ground has not escalated materially,” Amrita Sen, chief oil markets analyst at London-based Energy Aspects Ltd., said in a report cited by Bloomberg. “Iraqi supply losses have been minimal so far.”

Iraq

Sunni militants, led by a group of extremists called ISIS (Islamic State in Iraq and the Levant), continued advancing throughout Iraq. Tribal fighters loyal to the Islamists captured Baiji refinery, Iraq’s foremost source of refined fuels, supplying about a third of the country’s fuel. A tribal spokesman said his tribe had “fully captured” the refinery, and that the advance towards Baghdad would continue, the BBC reported.

Elsewhere, insurgents seized all official border crossings in Syria and Jordan. The Jordanian army has been on full alert, protecting its borders against incursions, the Jordanian military said.

The Iraqi government insisted insurgents do not threaten Baghdad, nor the southern oilfields, which account for more than 75% of Iraqi oil output.

Iraq is OPEC’s second-top oil producer, and exports some 3 million barrels per day from its main southern terminal at Basra.

US reports

The private American Petroleum Institute (API) will post its weekly reading on US oil inventories for the seven days ended June 20 later today. The Institute predicted a 5.7 million-barrel draw for crude oil stockpiles last week, while the official Energy Information Administration (EIA) figures stood for a relatively small drop of 579 000 barrels.

This week’s EIA report is due tomorrow, and analysts predict a 1.333 million barrel-decline for crude, while gasoline probably added 1.833 million barrels and distillate fuels gained 1 million.

Previously, key economic reports were released yesterday. The Eurozone, which accounts for 14% of total oil consumption, reported preliminary services and manufacturing PMI for June, with Germany, France and the Bloc as a whole scoring worse than expected. HSBC revealed a surprisingly improving factory sector in China for June, while the US revealed existing home sales improved in May.

Natural gas

Front month natural gas futures, due in July, added 0.97% at the New York Mercantile Exchange to trade for $4.489 per million British thermal units at 13:41 GMT today. Prices ranged from $4.431 to $4.498 per mBtu. The contract dropped 1.81% yesterday, after losing about 4.5% last week.

Natural gas extended its weekly decline on Thursday after the Energy Information Administration reported a larger-than-projected build in US natural gas inventories during the week ended June 13th. The log revealed a gain of 113 billion cubic feet, while analysts at NatGasWeather.com had suggested a 105-110 Bcf injection. The 5-year average gain for the week is 85 Bcf. Inventory levels remain 29.1% below last year’s readings for the same week.

However, movement to the downside is expected to be limited as the US enters the summer season when high temperatures spur electricity demand to power air conditioning, with power stations accounting for 30% of US natural gas consumption. The above-normal temperatures over the US recently will probably dent gains in the report this week, which will cover the seven days ending June 20.

“The latest forecasts suggests that the call on nat gas for cooling demand will not be atypical for this time of the year and thus inventory injections are likely to continue to outperform the historical injections,” Dominick Chirichella, senior partner at the Energy Management Institute in New York, said in a note to clients today, cited by Bloomberg.

Chirichella added that blue fuel stockpiles probably expanded by 101 Billion cubic feet (Bcf), while Tim Evans, an energy analyst at Citi Futures in New York, is expecting a gain of 93 Bcf, according to Bloomberg. NatGasWeather.com suggests a gain of about 105 Bcf.