Commodities trading outlook: crude oil and natural gas futures

WTI and Brent futures were lower during midday trade in Europe today, and were headed for sizable weekly losses. Meanwhile, natural gas futures were also lower, after a significant gain on Thursday, when the US EIA posted its weekly reading on nat gas inventories.

West Texas Intermediate futures for settlement in August traded for $103.75 per barrel at 12:48 GMT on the New York Mercantile Exchange, down 0.30%. Prices ranged from $104.13 to $103.64 per barrel. The US contract dropped 0.40% yesterday, and so far this week WTI has lost about 1.6%.

Meanwhile on the ICE in London, Brent futures due in August stood for a 0.32% loss at $110.65 per barrel. Daily high and low stood at $111.29 and $110.60 per barrel, respectively. Brent’s premium to WTI stood at $6.90, after last session’s closing margin of $6.94. The European contract dropped 0.22% on Thursday, and so far this week Brent has also lost about 1.5%.

US reports

Key US employment data was revealed yesterday. Nonfarm payrolls for June increased by 288 000, which is a four-year peak. ADP posted a 281 000 figure on Wednesday, and analysts had earlier suggested a growth of about 210 000. The unemployment rate dropped to 6.1%, which is the lowest rate since September 2008.

The US Energy Information Administration (EIA) posted its weekly oil inventories report for the seven day through June 27 on Wednesday. The log revealed a 3.155 million-barrel draw for commercial crude oil inventories, gasoline stocks dropped 1.235 million barrels, while distillates added 0.975 million barrels.

Refineries picked up pace, with gasoline production adding some 5% as summer driving season enters peak period.

Iraq, Libya

Iraqi military have had inconclusive fights with militants for the city of Tikrit. The army was urgently reinforced by Russian and Belorussian fighter aircraft, purchased by the government in haste. Elsewhere, militants tighten their grip on the northern provinces of the country, with the Kurdish semi-autonomous state recently joining the fight against the jihadists.

In Baghdad, the Iraqi government failed to elect a new leadership earlier this week, as Sunni-Muslim and Kurdish representatives boycotted the vote and the election body failed to reach a quorum. The current Iraqi government, led by PM Maliki, is said to be quite exclusive of ethnicities other than Shia-Muslims, which represent about 65% of Iraq’s population.

Elsewhere, two oil-exporting ports in eastern Libya have been reopened after being closed for almost a year due to insurgency. The Es Sider and Ras Lanuf facilities are Libya’s biggest and third-biggest ports, and have a combined potential exporting capabilities of more than 0.5 million barrels per day. If they indeed reach optimal capacity they will increase Libya’s output five times, Bloomberg reported.

Natural gas

Front month natural gas futures, due in August, dropped 1.25% at the New York Mercantile Exchange to trade for $4.351 per million British thermal units at 12:50 GMT today. Prices ranged from $4.402 to $4.345 per mBtu. The contract added 1.12% yesterday, reaching a monthly low of $4.329 per mBtu, and erasing losses from earlier this week.

The US Energy Information Administration (EIA) posted its weekly reading on natural gas inventories for the seven days ended June 27 yesterday. Stocks were shown to have added 100 Billion cubic feet (Bcf), 22 Bcf more than the 5-year average gain for the week. NatGasWeather.com had predicted a gain of 99-103 Bcf.

Total gas held in underground storage hubs is still 25.7% lower than last year’s levels during the comparable period. However, the EIA has suggested gains will continue to be above-average, and that most likely inventories will be completely replenished ahead of winter heating season.

NatGasWeather.com reported on Thursday, that the high pressure build-up over much of the western and southern US will keep temperatures relatively high, reaching above 100 in many places. A cooler weather system will track through the Midwest and Northeast, bringing showers and clouds and dragging readings down a few degrees, before another surge on high pressure later in the seven-day period. Tropical Cyclone Arthur remains impressive and could drive some market fear, though the high pressure over the Midwest should push the storm offshore. Cooling demand is projected to be moderate-to-high.

In the 8-14 day outlook, NatGasWeather.com projects a neutral trend for the US, with an upward bias. The southern and central, as well as the western states will be relatively warm for the whole period, with the northern and eastern states experiencing some cool early on, though following suit with heat soon after. Thunderstorms will increase over the South and Southwest as the monsoon season begins due to hot temperatures and high humidities.