Oil Gains on Improved US Job Data; Gas Futures Slump on Warmer Climate

Edited by Vani Rao

Improved US employment data peps up economic recovery hopes

Crude Oil

On Friday, March 7, 2014, light sweet crude for April delivery gained 1%, or $1.02 a barrel, on the New York Mercantile Exchange (NYMEX) to end the week at $102.58 a barrel. WTI crude fell 1 cent a barrel during the week.

The US added 175,000 new non-farm payrolls during the month of February, above the Bloomberg median estimates of 149,000 and revised estimates of 129,000. On Thursday, March 6, 2014, the US had reported decline in new jobless claims. The recent economic data signals an improving US economy and gradually tapering of the Fed’s monetary stimulus.

Source: Bloomberg/WSA
Source: Bloomberg/WSA

However, the gains were limited as China reported weak economic data. Chinese exports fell 18.1% in the month of February, while imports rose 10.1% during the same period. The economic data release was a negative surprise for economists who were expecting a 6.8% rise in exports and 8% rise in imports.

China reported a trade deficit of $22.99 billion for the month of February 2014, compared to a surplus of $31.86 billion in January 2014. Economists at Bloomberg were expecting a trade surplus of $14.5 billion. Crude oil imports by the world’s largest crude oil importer for February 2014 fell 18.1% month-over-month to 23.05 million metric tons.

Over the weekend, China reported a 2% year-over-year rise in the Consumer Price Index (CPI), marginally below the Bloomberg median estimate of 2.1%. The world’s second-largest economy reported a 2% year-over-year decline in the Producer Price Index (PPI), marginally ahead of Bloomberg’s economists’ estimate of a 1.9% year-over-year decline.

Source: Bloomberg/WSA
Source: Bloomberg/WSA

The recent weak economic data releases indicate a slowdown in the Chinese economy.

For the week ahead, all eyes will be on retail sales data scheduled for release on Thursday, March 13, 2014, and consumer sentiment data slated on Friday, March 14, 2014. Economists are expecting a 0.2% rise in retail sales and consumer sentiment index of 82.0, above 81.6 for February 2014.

On Friday, March 7, 2014, the European standard Brent crude rose 0.83%, or 90 cents a barrel, to end the week at $109 a barrel. The ICE Futures Exchange trade crude fell 0.06%, or 7 cents a barrel, during the week. The spread between the Brent and WTI crude stood at $6.49 a barrel.

Source: Bloomberg
Source: Bloomberg

The WTI and Brent crude were last trading at $101.28 and $107.94 a barrel, respectively, at the time of reporting.

Natural Gas

US natural gas prices fell on Friday, 7 March 2014, as the warmer climate drove households to cut down their gas usage for heating purposes. Spring is the lean season for natural gas as there is no extreme temperature to hike up the gas demand for heating or air conditioning purposes.

The April delivery for natural gas futures on the NYMEX declined 0.94%, or 0.044 cents per million British Thermal Unit (BTU), to $4.618 per BTU.

Source: Bloomberg
Source: Bloomberg

During the week, natural gas April futures edged 0.19% higher, or $0.009 cents per million BTU, on the NYMEX.

Natural gas prices rallied on Thursday as US gas storage fell by 152 billion cubic feet, more than expectations of 138 billion cubic feet. Total US gas stockpiles stood at 1.196 trillion cubic feet, the lowest since 2004. On Thursday, the April delivery contracts surged 3.07%, or 13.9 cents, to close at $4.662 per million BTU.

The heating season from November through March witnessed gas prices rising to its five-year high of $6.493 per million BTU on February 20, 2014.

US Natural Gas was last trading at $4. 616 per million BTU at the time of reporting.

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