Crude Falls as Crimea Votes for Sovereignty; Natural Gas Sees Upsurge as Frigid Weather Rebounds

Edited by Vani Rao

Crude prices ease with no major sanctions against Russia and Ukraine

Crude Oil

On Monday, March 17, 2014, the US crude fell 81 cents to end at $98.08 a barrel on the New York Mercantile Exchange (NYMEX). The light, sweet crude prices fell after Crimea voted to separate from Ukraine. Crude oil prices were down on the likelihood of crude supplies being disrupted after the Crimea voting.

In the week ended March 14, 2014, light sweet crude fell 3.59%, or $3.69 a barrel, as the US and China, the world’s largest and second-largest oil consumers, respectively, reported a slowdown in their crude oil demand. The US announced an oil test sale from its Strategic Petroleum Reserve as it is witnessing a spike in its crude oil reserves following the shale gas boom. China’s crude oil demand fell 3.1%, or 9.98 million barrels a day, for the consolidated period of January and February.

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WTI crude gained 0.7%, or 69 cents, on Friday, March 14, on reports of the US and the EU sanctions on Russia following the pro-Russian voting in Crimea. However, there were no sanctions over Ukraine, the oil and gas gateway to European nations, which has eased crude oil prices.

Crimea voted for its sovereignty on Sunday, March 16, where a total of 95.5% voters backed the move to break away from Ukraine and join Russia. The US and the EU have termed the referendum as illegal, while Russia is slated to pass a resolution in its Lower House of Parliament, thereby allowing Crimea to join the nation.

The overwhelming pro-Russian support from Crimea has further fuelled the geo-political tensions in the region. Meanwhile, the US and the EU has imposed a travel ban and have frozen the accounts and assets of top Russian and Ukrainian politicians. Russia’s reaction to the sanction will drive the crude oil prices in the near future.

In the week ahead, the Fed will announce its monetary policy on Wednesday, March 19, and is also expected to publish its economic forecasts. All eyes will be on the Fed for scaling back its monetary stimulus.

On Monday, March 17, Brent crude May futures fell 1.82%, or $1.97 a barrel, to close the day at $106.24 a barrel on the NYMEX. The European benchmark crude oil was trading at a premium of $8.16 a barrel to the US crude oil on the NYMEX for the same month.

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The WTI and Brent crude were last trading at $98.00 and $106.48 a barrel, respectively, at the time of reporting.

Natural Gas

On Monday, March 17, 2014, natural gas prices surged as the cold weather is likely to rebound across the north-eastern regions of the US in the near future.

Natural gas prices for April delivery gained 2.5%, or 11.1 cents, to settle the day at $4.536 per million British Thermal Units (BTU). Natural gas prices hit the intra-day high of $4.580 per million BTU.

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According to AccuWeather’s weather-forecasting models, the central and north-eastern parts of the US are likely to witness below-normal temperatures from March 22 through March 31. The natural gas prices have gained on anticipations that households are likely to escalate their gas demand on frigid weather conditions.

According to the US Department of Energy, approximately 52% of the US households use natural gas for heating purposes during the peak winter season from November through March.

On Monday, March 17, 2014, natural gas prices rose after a slump to a seven-week low of $4.341in the last week on warmer weather conditions. Spring is a lean season for natural gas as there is no extreme temperature to hike the gas demand for heating or air conditioning purposes.

US Natural Gas was last trading at $4.529 per million BTU at the time of reporting.

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