Commodities trading outlook: crude oil and natural gas futures

WTI and Brent futures were higher during midday trade in Europe today. The US and EU stepped up sanctions against Russia, as Moscows efforts towards peace in Ukraine are deemed insufficient. Meanwhile, natural gas futures fell ahead of the EIA weekly nat gas report.

West Texas Intermediate futures for settlement in August traded for $102.52 per barrel at 12:06 GMT on the New York Mercantile Exchange, up 1.30%. Prices ranged from $102.56 to $101.27 per barrel. The US contract added 1.24% yesterday and has added some 0.4% so far this week.

Meanwhile on the ICE in London, Brent futures due in September stood for a 0.60% gain at $107.81 per barrel. Daily high and low stood at $107.85 and $106.80 per barrel, respectively. Brent’s premium to September WTI stood at $5.96, after last session’s closing margin of $6.57. The European contract gained 0.27% on Wednesday, leveling this week’s price movement.

Ukraine

The US and EU stepped up sanctions against Russia, as Moscow’s efforts to deescalate tensions in Ukraine are seen as insufficient. In addition to expanding the list of individuals, the US also targeted Gazprombank, the Russian gas giant’s bank, Rosneft and the Kalashnikov concern, limiting their access to US capital markets.

“The Russian leadership will see once again that its actions in Ukraine have consequences,” US President Obama said. “Ukrainians deserve to forge their own destiny”.

The EU also added that the European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD) would stop financing projects in Russia. The EIB alone has provided more than €1.6 billion for Russian ventures since 2003.

Meanwhile, a spokesman for the Ukraines defense ministry said that a warplane of the military had been shot down by a Russian jet late on Wednesday. Previously, Kiev said that it was a Russian rocket, which downed another Ukrainian plane last week, while also saying that a Russian plane had hit an eastern Ukrainian town.

The Kremlin has denied all accusations.

US oil report

The US Energy Information Administration (EIA) posted its weekly oil inventories report for the seven day through July 11 yesterday. The log revealed a 7.525 million-barrel for commercial crude oil inventories, after the private American Petroleum Institute (API) had suggested a 4.8 million-barrel draw on Tuesday. A Bloomberg survey had projected a 2.75 million-barrel drop. The previous reading, for the week through July 4, showed crude inventories had dropped 2.4 million barrels.

Oil at Cushing, Oklahoma, the delivery point for the NYMEX contract and the largest hub in the US, was reported at 20.3 million barrels for a 0.6 million-barrel drop, after an increase of 0.4 million was logged for the previous week. Meanwhile, hubs at the Gulf Coast saw 2.8 million barrels drawn, after a further 4.2 million drop was reported last week.

Domestic production of crude oil was little changed for a reading of 8.592 million barrels per day (bpd), after more minor changes over the last three weeks. Meanwhile, imports of crude were slightly up at 7.427 million bpd.

Gasoline inventories added 0.171 million barrels for the week through July 11, while the API had reported a 1.6 million-barrel draw. Distillate fuels stockpiles levels increased by 2.528 million barrels, while the API posted a 1.3 million-barrel decrease on Tuesday.

Refinery utilization rate was up 2.2% for a standing of 93.8%, and a total increase of more than 7% for the last three weeks. Gasoline production this week was slightly lower at 9.775 million bpd, while distillates output averaged 5.172 million bpd.

Natural gas

Front month natural gas futures, due in August, were down 0.73% at the New York Mercantile Exchange to trade for $4.089 per million British thermal units at 12:08 GMT today. Prices ranged from $4.087 to $4.110 per mBtu. The contract added 0.54% yesterday, leveling the price change this week.

While gas prices may deteriorate for the next three weeks on mild summer weather, “we think we will see a relatively significant correction by year-end,” Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York, said for Bloomberg.

NatGasWeather.com suggested an injection of 96-101 Bcf will be reported in this week’s EIA log later today, about 25 Bcf more than the 5-year average gain for the reported week. However, next week’s build up is suggested to be some 45-50 Bcf above the average, which would be the biggest gain this summer season. A Bloomberg survey suggested an injection of 100 Bcf this week.

Previously, the EIA reported a sizable output increase at the Marcellus shale deposit in the US Northeast, as gross output from the region will average 15.235 billion cubic feet a day this month, up 28 percent from a year earlier.