Commodities trading outlook: crude oil and natural gas futures

WTI and Brent futures were losing ground during midday trade in Europe today, ahead of US oil inventories data, Ukraine offering background support. Meanwhile, natural gas futures extended the recent slump, as more cool weather is forecast for top-consumer US.

WTI for September delivery on the NYMEX trade for $102.58 per barrel at 13:53 GMT today, down 0.27%. Prices ranged from $102.54 to a weekly high of $103.45 per barrel. The contract added 0.89% on Monday, after adding some 2.2% last week.

Meanwhile on the ICE in London, Brent contracts for settlement in September stood at $107.88 per barrel at 7:23 GMT today, up 0.19%. Daily high and low were at $108.40 and $107.54 per barrel, respectively. Brent’s premium to WTI was at $5.30, after Monday’s $4.82 closing margin. The European contract added 0.41% on Monday, after logging minor losses last week.

“Inventories are something that can influence prices as in the past weeks there were large draws which were bullish,” Gerrit Zambo, oil trader at Bayerische Landesbank in Munich, said for Bloomberg today. “There is concern that there will be further sanctions on Russia and that those could have an impact on oil.”

The private American Petroleum Institute will post its weekly reading on US oil stocks later today. A Bloomberg survey suggested crude stockpiles saw 2.8 million barrels drawn in the week ended July 18. Gasoline inventories probably added about 1 million barrels, while distillates supplies increased by some 2 million, the survey projected.

The official Energy Information Administration (EIA) report is released each Wednesday.

Last week’s log revealed a 7.525 million-barrel draw for commercial crude oil inventories, while gasoline and distillates added 0.171 million and 2.528 million barrels, respectively.

Elsewhere, US CPI for June was posted today, for a reading of 2.1% on an annual basis, as predicted and matching the Fed’s target. Consumer inflation is a major indicator for the health of the economy, as it gauges consumer spending, which generates about 80% of US GDP.

Also to be reported today, existing home sales are projected to have added 2.0% on a monthly basis in June, after a further 4.9% increase was reported in May. The real estate industry accounts for about 13% of US GDP.

Ukraine crisis

The UN Security Council voted unanimously in favor of a “full, thorough and independent international investigation” of the downing of flight MH17. It also demanded that those responsible “be held to account and that all states co-operate fully with efforts to establish accountability”, the BBC reported.

The Malaysian Boeing 777 was shot down over rebel-held territory in Ukraine on Thursday, killing all 298 people on board.

British Prime Minister David Cameron reaffirmed the widely shared view that it was a Russian-supplied Buk missile, fired by pro-Russian separatists, which shot down the Malaysian airliner.

Moscow dismissed any liability again on Monday, denying it has supplied rebels with missiles or “any other weapons”, the BBC reported.

Libya

Libyan output shrank by almost 20% since last week to 450 000 barrels per day, the National Oil Corporation said, cited by Reuters. However, the port at Brega was set for reopening, as authorities reached an agreement with protesting security guards.

“The expectation that Libya supplies will return has put some pressure on Brent, but there is still a lot of fighting,” Olivier Jakob at Petromatrix in Zug, Switzerland, said for Reuters.

The 450 000 bpd output is about 10% of the countrys production some 3 years ago. Libya descended into chaotic violence since the ousting of former dictator Muammar Gaddafi, with production dropping as low as 150 000 bpd a month ago.

Natural gas

Front month natural gas futures, due in August, traded for $3.816 per million British thermal units (mBtu) at 13:55 GMT in New York today. Prices shifted between an eight-month low of $3.797 and $3.866 per mBtu. The contract dropped 2.58% on Monday, following a 4.7% loss for last week.

“We’re seeing some cool weather on the East Coast in the 10-day forecasts,” Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York, said for Bloomberg. “We’ve had some pretty big storage numbers that have been leaning on prices.”

Natural gas in storage increased by 107 Billion cubic feet (Bcf) in the week through July 11, the US Energy Information Administration (EIA) reported last Thursday. The build up exceeded expectations, pressuring the blue fuel. Mild weather forecasts applied more pressure on Monday, pushing futures to a seven-month low.

NatGasWeather.com suggested an injection of about 90 Bcf will be reported this week as well, which would be a massive ~40 Bcf above the 5-year average gain for the week. Equally large margins are projected for the following week as well.

NatGasWeather.com reported today that the northern US are seeing high pressure setting in, allowing for rising temperatures. However, a succession of cool Canadian blasts will be pushing into the US by Wednesday. The initial wave will not be quite impressive, but the following blasts will bring showers, rains and thunderstorms, and will push temperatures below normal for most of the US Northeast. The southern and western US will remain within an area of high pressure, keeping readings relatively high, apart from the Southeast, which will be briefly subject to a cooler system tracking through the Atlantic. Cooling demand over the next seven days will probably be moderate.

In the 8-14 day outlook, NatGasWeather.com projects a neutral trend for the US, with the Midwest and Northeast experiencing several degrees of cooling, with the cool blasts entering from Canada. The western and southern states will see little weather excitement, with high pressure dominating the outlook, keeping temps high.