Oil Pulls Back as Supply Shrinks

Edited by Vani Rao

Natural gas prices drop on US inventory data

On the New York Mercantile Exchange (NYMEX), the West Texas Intermediate crude oil for delivery in June traded at $100.45 a barrel, up 0.18%, after hitting an overnight session low of $99.88 a barrel and a high of $100.93 a barrel. The June contract settled up 1.28% at $100.77 a barrel on Wednesday, May 7, 2014.

Concerns that Ukraine will descend into civil war eased after President Putin called on separatists in the eastern reaches of the country to postpone their referendum on independence, adding that Russia had withdrawn its forces from the border areas. The crisis has supported oil prices on fears that escalating conflict could affect shipments out of Russia, the world’s second-largest oil exporter after Saudi Arabia.

The West Texas Intermediate headed for its first weekly advance since April as crude stockpiles shrank for the first time in more than a month in the US, the world’s biggest oil consumer.

Brent for June settlement was 2 cents higher at $108.06 a barrel on the London-based ICE Futures Europe exchange, and is poised for a second weekly drop. The European benchmark grade was at a premium of $7.64 to WTI, compared with $8.83 on May 2, 2014.

Meanwhile in the US, the Department of Labor reported that the number of individuals filing for unemployment assistance last week fell by 26,000 to 319,000 from the previous week’s revised total of 345,000. Analysts had expected jobless claims to fall by 20,000 to 325,000, and the upbeat numbers in the US and China, the world’s largest and second-largest consumers of crude, respectively, supported the growth-sensitive commodity.

Natural gas prices drop on bearish US inventory data

Natural gas futures fell the most in 10 weeks after a government report showed a bigger-than-forecast US inventory increase.

Natural Gas dropped to a three-week low as the Energy Information Administration (EIA) said that stockpiles rose 74 billion cubic feet in the week ended May 2, 2014, to 1.055 trillion cubic feet. Analyst estimates compiled by Bloomberg showed an expected gain of 70 billion cubic feet. The deficit to five-year average supplies was the narrowest since March 14, 2014.

Source: US Energy Information Administration
Source: US Energy Information Administration

Natural gas for June delivery fell 16.8 cents, or 3.5%, to $4.572 per million British Thermal Units (BTU) on the NYMEX, the lowest settlement since April 16 and biggest one-day decline for a front-month contract since February 26. Volumes for all futures traded were 23% above the 100-day.Gas was up 8.1% this year.

The natural gas stockpile increase was bigger than the five-year average gain for the week at 72 billion cubic feet, according to the EIA, the US Energy Department’s statistical arm. The deficit to the average narrowed to 48.2% from 50.1% in the previous week. Supplies were 43% below the year-ago inventories, compared with 44.6% in last week’s report.

About 49% of US households use gas for heating, while electricity generators consume 31% of the fuel, according to data provided by the EIA.

Total US natural gas storage stood at 1.055 trillion cubic feet. Stocks were 797 billion cubic feet lesser than last year at this time and 982 billion cubic feet below the five-year average of 2.037 trillion cubic feet for this time of year.

Elsewhere, updated weather forecasting models called for above-normal temperatures over much of the Midwest and Northeast, as well as the South, which was likely to lower heating demand, although expectations that the heat wave will hike air conditioning use cushioned losses. Spring and fall see the weakest demand for natural gas in the US, as the absence of extreme temperatures curbs demand for heating and air conditioning.

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