Crude Surges on Improved Economic Data, Natural Gas Swells on Declining Inventory

Edited by Vani Rao

Improved GDP forecast, rise in personal spending fuel crude prices

Crude Oil

On Thursday, March 27, 2014, US crude gained 1.02%, or $1.02, to end at $101.28 a barrel on the New York Mercantile Exchange (NYMEX). Light, sweet crude prices rebounded after hitting an intra-day low of $100.05 and an intra-day high of $101.69. WTI crude gained 1.83% during the first four sessions of the week.

oil and gas pic 1

The US benchmark crude surged on Thursday, March 27, 2014, after the US Commerce Department revised upwards the US GDP to 2.6% for the last quarter of 2013 from the initial forecast of 2.4%. The median GDP estimate of economists surveyed by Bloomberg stood at 2.7%. The US Commerce Department also revised upwards the personal spending growth for the last quarter from 2.6% to 3.3%, the strongest increase since late 2010. The department is positive on the fourth-quarter economic indicators despite 16 days of government shutdown and harsh winter climatic conditions.

The US Commerce Department also reported that in February 2014, orders for motor vehicles and parts improved 3.6% and demand for all durable goods increased 2.2%, above the median estimates of 0.8%.

In a separate report issued by the US Labor Department, initial jobless claims for the week ended March 21, 2014, fell by 10,000 to a 311,000. Bloomberg median estimates of initial jobless claims expected first-time jobless beneficiaries to rise by 4,000.

The US Energy Information Administration (EIA) stated that crude inventory at Cushing, Oklahoma, fell by 1.33 million barrels to 28.5 million barrels, a two-year low and the eighth consecutive week of decline. However, total US crude inventories grew by 5.85 million barrels.

The crude oil prices witnessed a spike after the US and the EU imposed fresh sanctions against Russia, the global leader in oil and gas supplies, for its involvement in the internal affairs of Ukraine and annexing Crimea.  European nations depend on Russia for their crude oil and gas supplies, which are routed through Ukraine.

On Thursday, March 27, 2014, the European benchmark crude gained 80 cents, or 0.75%, to $107.83 a barrel. The crude oil spread between the Brent and WTI narrowed to $6.55 a barrel.

oil and gas pic 2The WTI and Brent crude were last trading at $101.59 and $107.90 a barrel, respectively, at the time of reporting.

Natural Gas

On Thursday, March 21, 2014, natural gas prices continued to rise for the third consecutive day during the week as natural gas stockpiles decreased more than Bloomberg estimates.

The May delivery for natural gas futures on the NYMEX declined more than 3.09%, or 13.6 cents, to settle the day at $4.584 per million British Thermal Units (BTU). Natural gas April futures have advanced more than 5.21%, or 22.5 cents, during the week.

oil and gas pic 3

On Thursday, March 27, 2014, the EIA reported that natural gas stockpiles for the week ended March 21, 2014, declined by 57 billion cubic feet against Bloomberg analysts’ expectations of a 54 billion cubic feet decline. US total natural gas stockpiles stood at 896 billion cubic feet, below the five-year average of 1.822 trillion cubic feet, and the lowest since 2003, for this period in 2014.

The recent increase in natural gas prices is likely to be short lived as the prices will be determined by demand for natural gas that is fading with the onset of milder spring season.

US Natural Gas was last trading at $4.544 per million BTU at the time of reporting.

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