Crude Surges on Housing Data, Natural Gas Trims Gains

Edited by Vani Rao

New house sales back on growth track, outperforms estimates

Crude Oil

The WTI crude gained 2.28%, or $2.33 a barrel, during the week ended Friday, May 23, 2014. The light, sweet crude posted its highest weekly gains in the last four weeks after better-than- expected new house sales.

Source: Bloomberg
Source: Bloomberg

On Friday, May 23, 2014, US crude oil prices improved 61 cents, or 0.59%, to end the week at $104.35 a barrel, below its current yearly high of $104.92 a barrel. The crude prices rose after the US Department of Commerce reported that new homes sales rose 6.4% to 433,000 in April 2014. The new home sales had fallen by 4.4% and 6.9% in February and March 2014, respectively. The new home sales data for April 2014 has outperformed the Bloomberg analyst figure of 425,000.

In another major economic data release, the US Department of Labor reported that first-time jobless claims for the week ended May 16, 2014, has risen by 28,000 to 326,000, the lowest growth since May 2007.

Earlier during the week on Wednesday, May 21, 2014, the New York Mercantile Exchange (NYMEX)-traded crude rose $1.74 a barrel, or 1.70%, after the Energy Information Administration (EIA) reported that crude oil inventories fell by 7.2 million barrels to 391.3 million barrels for week ended May 16, 2014. Analysts at Bloomberg were expecting crude oil inventories to rise by 0.8 million barrels.

During the week, crude prices were under bullish pressure as the politically unstable Ukraine was scheduled to go on polls on Sunday, May 25, 2014. Among the other international news, oil production in oil-rich Libya has declined over the months owning to political unrest and the ongoing civil war.

In the week ahead, all eyes will be the Friday’s revised Q1 US GDP data by the Bureau of Economic Analysis, US Department of Commerce. On the same day, Reuters and the University of Michigan will announce the US consumer sentiment index for the month of May.

On Friday, May 23, 2014, the European standard Brent crude rose 0.14%, or 15 cents a barrel, to end the week at $110.36 a barrel. The ICE Futures Exchange traded crude gained 0.56%, or 61 cents a barrel, during the week. The spread between the Brent and WTI crude narrowed to $6.19 a barrel.

Source: Bloomberg
Source: Bloomberg

The WTI and Brent crude were last trading at $104.40 and $110.63 a barrel, respectively, at the time of reporting.

Natural Gas

US natural gas prices for July delivery fell 0.18%, or 0.08 cents per million British Thermal Units (BTU), to settle the week at $4.405 per million BTU on positive natural gas inventory.

Source: Bloomberg
Source: Bloomberg

Natural gas prices fell 2.54%, or 11.4 cents per BTU, on Thursday, May 22, as the EIA reported in its weekly report that the US natural gas stockpiles for the week ended May 16 rose 106 billion cubic feet to 1.266 trillion cubic feet, more than the Bloomberg forecast of an increase of 102 billion cubic feet. However, at the present level, the US natural gas stock piles are 774 billion cubic feet lesser than this time last year and 943 billion cubic feet lesser than the five-year average of 2.209 trillion cubic feet.

On Friday, May 23, 2014, natural gas prices rose 1.05%, or 4.6 cents per BTU, as a correction after a decline in the previous day’s trading session. The natural gas prices rebounded from the week’s lowest price level of $4.354 as on May 22, 2014, providing for a stronger support level.

In the long run, natural gas prices are set to ease further as the US is witnessing warmer 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 Department of Energy, approximately 52% of US households use natural gas for heating purposes.

US Natural Gas was last trading at $4.390 per million BTU at the time of reporting.

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