Crude Slides to Sub-$100 Level, Natural Gas Snaps Losing Streak

Edited By Vani Rao

Fire at Kansas refinery curbs total crude oil demand

Crude Oil

The WTI crude for September delivery declined 4.12%, or $4.21 a barrel, during the week ended Friday, August 1, 2014, due to strong US economic data and fall in crude oil demand after a fire in a Kansas refinery.

Source: Bloomberg
Source: Bloomberg

On Friday, August 1, 2014, US crude oil prices fell 29 cents, or 0.30%, to end the week at $97.88 a barrel, extending the weekly losses. Crude oil prices have been declining over the past few weeks as the US Energy Information Administration (EIA) has reported a rise in gasoline inventories.

An 115,000-barrel-a-day refinery unit in Coffeyville, Kansas, was shut down due to a fire that erupted on Tuesday, July 29, 2014. The Kansas refinery is located close to the major crude oil storage hub at Cushing, Oklahoma. Due to the shutdown, the demand for WTI crude has fallen, exerting a negative pressure on crude prices.

The US Department of Commerce released its GDP estimates for Q2 FY2014. The GDP was estimated to grow at 4% year over year, as compared to a 2% decline in the prior year comparable quarter. The encouraging data sent the dollar strength soaring to a 10-month high, rendering crude oil imports cheaper.

On Wednesday, July 30, 2014, crude oil declined even as the EIA reported that crude oil inventories fell 3.7 million barrels, well below the Bloomberg consensus of a decline of 1.8 million barrels to 367.4 million barrels for week ended July 18, 2014. However, total gasoline inventory increased 0.4 million barrels last week to 218.2 million barrels.

The US Department of Labor reported that first-time jobless claims for the week ended July 26, 2014 rose by 23,000 to 302,000, against the consensus estimates of 305,000. Later on Friday August 1, 2014, the US Department of Labor also reported that unemployment levels in July inched up to 6.2% from 6.1% in June 2014.

Later during the week, the US Department of Commerce reported a 0.7% rise in new factory orders for durables in June 2014, compared a decline of 1% in May 2014 and above market consensus for a gain of 0.5%.

In the week ahead, all eyes will be on the Census Bureau of the Department of Commerce’s factory orders for the month of June 2014, which is estimated to grow by 0.4% month-over-month, compared to a decline of 0.5% in the month of May 2014. On Thursday, August 7, 2014, the US Department of Labor will report the status of new jobless claims.

On Friday, August 1, 2014, the European Standard Brent crude fell 1.10%, or $1.18 a barrel, to end the week at $104.84 a barrel. The ICE Futures Exchange-traded crude declined 3.28%, or $3.55 a barrel, during the week. The spread between the Brent and WTI crude widened to $6.96 a barrel.

Source: Bloomberg
Source: Bloomberg

The WTI and Brent crude were last trading at $98.01 and $104.96 a barrel, respectively, at the time of reporting.

Natural Gas

US natural gas prices for September delivery advanced 0.45%, or 1.7 cents per million British Thermal Units (BTU), to settle at $3.798, snapping a four-week loss trend after the EIA reported a bearish natural gas inventory.

Source: Bloomberg
Source: Bloomberg

On Friday, August 1, 2014, natural gas prices lost 1.12%, or 64.3 cents per BTU, trimming the weekly gains after the AccuWeather predicted mild summer weather in much of the US through the next few days.

The natural gas prices rose over 1.5% on Thursday after the EIA in its weekly reported stated that the US natural gas inventory rose by 88 billion cubic feet, which was below expectations of an increase of 93 billion cubic feet. Total US natural gas inventory stood at 2.307 trillion cubic feet for week ended July 26, 2014. It is still 21.7% below the five-year average of 2.759 trillion cubic feet.

Due to changes in weather, natural gas prices is likely to witness some fluctuations in the upcoming week. Utility companies use natural gas to produce electricity for meeting the demand for cooling solutions.

US Natural Gas was last trading at $3.79 per million BTU at the time of reporting.

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