Crude Rebound on Ukraine Crisis; Natural Gas Rates Hint Onset of Summer

Edited by Vani Rao

Crude prices rise with the US and the EU announcing major sanctions against Russia

Crude Oil

On Monday, March 24, 2014, the US crude oil prices improved 56 cents, or 0.57%, to end the week at $99.46 a barrel on the New York Mercantile Exchange (NYMEX). WTI crude gained 0.57%, or 57 cents a barrel, during the week. Weekly gains were cut short on the improving US crude supplies and the strengthening dollar.

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The light, sweet crude prices edged higher during the week amidst rising geopolitical tensions between Russia and Ukraine. There has been a series of political standoffs between Russia and the West. The US and the EU have criticized the annexation of the Crimea autonomous region by Russia. Both these countries have imposed sanctions on Moscow, the world’s largest exporter of oil and gas, which might impact oil supplies to the European nations. Moreover, Russian military action against Ukraine might also impact oil supply to the European nations as major oil pipelines to Europe are routed through Ukraine.

On another note, on the concluding day of the two-day policy review meeting, Fed Chair Janet Yellen stressed on signs of US economic recovery and announced a $10-billion cut in the Fed’s monthly bond-buying program to $55 billion. The US dollar improved against global currencies following indications of a possible interest rate hike next year, six months after the winding up of the monetary stimulus this fall.

US crude oil inventories improved 5.9 million barrels during the week ended March 14, 2014, to 375.9 million barrels, the ninth straight weekly gains. It was above the Bloomberg analysts’ median estimate gain of 2.75 million barrels.

In the week ahead, all eyes will be on major US economic data releases on the housing sector, consumer confidence, and durable goods. In the international arena, HSBC is scheduled to release the Purchasing Managers’ Index for Manufacturing on Monday, March 24, 2014.

On Friday, March 21, 2014, the European standard Brent crude rose 0.44%, or 47 cents a barrel, to end the week at $106.92 a barrel. The ICE Futures Exchange trade crude fell 1.19%, or $1.29 a barrel, during the week. The spread between the Brent and WTI crude stood at $7.46 a barrel.

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The WTI and Brent crude were last trading at $99.13 and $106.60 a barrel, respectively, at the time of reporting.

Natural Gas

US natural gas prices fell on Friday, March 21, 2014, as the warmer climate drove households to cut down their gas usage for heating purposes.

Natural gas prices for May delivery fell 1.28%, or 5.6 cents, to settle the week at $4.313 per million British Thermal Units (BTU). In the week ended March 21, 2014, natural gas prices fell 2.89%, or 12.8 cents per BTU, the second consecutive weekly decline.

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According to AccuWeather’s weather-forecasting models, the central and north-eastern parts of the US are likely to witness above-normal temperatures during the upcoming week. The natural gas prices have fallen as the household natural gas demand is easing with the onset of the spring season and milder weather conditions. Spring has always been a lean season for natural gas demand, as there is no extreme temperature to hike the gas demand for heating or air conditioning purposes.

On Thursday, March 20, 2014, natural gas prices slumped to its eight-week low as stockpiles decreased lower than Bloomberg estimates. The US Energy Information Administration (EIA) reported that natural gas stockpiles for the week ended March 14, 2014 declined to 48 billion cubic feet against Bloomberg analysts’ expectation of a 59 billion cubic feet decline. US total natural gas stockpiles stood at 953 billion cubic feet, below the five-year average of 1.829 trillion cubic feet, and the lowest since 2004, for this period in 2014.

US Natural Gas was last trading at $4.341 per million BTU at the time of reporting.

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