Crude Eases as Dollar Strengthens, Natural Gas Extends Weekly Losses

Edited by Vani Rao

Crude could witness volatility with EU imposing more sanctions on Russia

Crude Oil

The WTI crude gained 0.23%, or 23 cents a barrel, during the week ended May 9, 2014. The light, sweet crude posted its first weekly gains in the past three weeks as crude stockpiles at Cushing, Oklahoma, fell to a five-year low.

Source: Bloomberg
Source: Bloomberg

On Friday, May 9, 2014, US crude oil prices fell 27 cents, or 0.27%, to end the week at $99.99 a barrel on the New York Mercantile Exchange (NYMEX). This is mainly because the US dollar reported a substantial gain after the European Central Bank hinted at a possible monetary policy easing in the upcoming month. On Friday, May 9, 2014, the dollar index stood at 79.903, up from 79.516 on May 2, 2014.

Earlier on Friday, crude oil price rose to its highest level since April 29, 2014, after Russian President Vladimir Putin visited Crimea, fueling geopolitical tensions in the oil rich region. The Russian President was in the region to pacify the separatists, who were planning to ballot a referendum on independence on Sunday, May 11, 2014, which could lead to a civil war.

The US Energy Information Administration (EIA) stated on Wednesday, May 7, 2014, that the inventories at Cushing, Oklahoma, fell 1.4 million barrels to 24 million last week, the lowest in the last five years. On the same day, EIA reported that the US oil supplies fell to 1.78 million barrels from a record high of 399.4 million barrels last week.

During the week, WTI crude rose after China, the world’s second largest oil consumer, reported a trade surplus of $18.45 billion at the end of April 2014, much more than $7.7 billion in March 2014 and analysts’ estimates of $13.9 billion. China’s exports for April 2014 improved 0.9% YoY, against a 6.6% decline in March 2013 and analysts’ forecasts of a 2.3% decline.

In the week ahead, all eyes will be on the upcoming retail sales, consumer prices, and consumer sentiment index data, which are an indication of the economic strength and further withdrawal of the Fed’s monetary stimulus. On May 12, 2014, foreign ministers from 28 EU nations are preparing to impose sanctions of Russia, the second-largest oil exporting nation after Saudi Arabia.

On Friday, May 9, 2014, the European standard Brent crude rose 0.14%, or 15 cents a barrel, to end the week at $107.89 a barrel. The ICE Futures Exchange trade crude lost 0.25%, or 27 cents a barrel, during the week. The spread between the Brent and WTI crude stood at $7.9 a barrel.

Source: Bloomberg
Source: Bloomberg

The WTI and Brent crude were last trading at $100.11 and $108.16 a barrel, respectively, at the time of reporting.

Natural Gas

US natural gas prices fell on Friday, May 9, 2014, to a three-week low following an increase in the natural gas storage levels in the US. Natural gas prices for June delivery fell 3.06%, or 14.3 cents, to settle the week at $4.531 per million British Thermal Units (BTU).

Source: Bloomberg
Source: Bloomberg

During the week ended May 9, 2014, natural gas prices hit a weekly high of 4.819 per million BTU, supported by ongoing geopolitical tensions in Ukraine.

Natural gas prices fell on Thursday, May 8, as the EIA reported that natural gas stockpiles for the week ended May 2, 2014, improved 74 billion cubic feet more than Bloomberg analysts’ expectations of a 71 billion cubic feet decline.US total natural gas stockpiles stood at an 11-year low of 1.055 trillion cubic feet, 797 billion cubic feet below last year’s inventory and 982 billion cubic feet below the five-year average of 2.037 trillion cubic feet for the same period.

Natural gas prices are set to ease in the upcoming weeks as the US is witnessing warmer than average climate. With the onset of the spring season, there has been a reduction in natural gas demand for heating and air conditioning purposes from households. Hence, natural gas prices could witness a bearish trend going forward.

According to the US Energy Department, approximately 52% of US households use natural gas for heating purposes.

US Natural Gas was last trading at $4.467 per million BTU at the time of reporting.

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