US Crude Prices Ebb on High Gasoline Inventory

Edited by Vani Rao

Mild summer drags natural gas prices to eight-month low

Crude Oil

The WTI crude for September delivery fell 1.01%, or $1.04 a barrel, during the week ended Friday, July 25, 2014, as gasoline inventories rose for a third straight week.

Source: Bloomberg
Source: Bloomberg

On Friday, July 25, 2014, US crude oil prices advanced 2 cents to end the week at $102.09 a barrel, snapping a three-day declining trend. Crude oil prices have been declining over the past few weeks as the US Energy Information Administration (EIA) has reported bearish crude oil inventories and profit booking before the expiry.

Crude oil futures rose earlier last week after rising geopolitical tensions in Iraq and souring relationship between Russia and the West, after the downing of a Malaysian airplane in Ukraine by suspected pro-Russian supporters. Meanwhile, the United Nations Security Council has unanimously approved a resolution for an international probe on the cause for the disaster.

On Wednesday, July 23, 2014, crude oil declined even as the EIA reported that crude oil inventories fell four million barrels, well below the Bloomberg consensus for a decline of 2.9 million barrels to 371.1 million barrels for week ended July 18, 2014.

Meanwhile, crude oil stockpiles at Cushing, Oklahoma, declined by 1.45 million barrels to 18.8 million barrels, its lowest level since November 2008. However, the EIA reported that gasoline stockpiles had surged 3.38 million barrels, much above the consensus estimate gain of one million barrels.

On Thursday, July 24, 2014, the US Department of Labor reported that first-time jobless claims for the week ended July 19, 2014 fell by 19,000 to 284,000 and below the consensus estimates of 310,000. Earlier during the day, HSBC reported that its preliminary reading of China’s manufacturing PMI for July 2014 was at 52.0, well ahead of the expected 51.0.

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 US Department of Commerce’s release of Q2 advance GDP estimates on Wednesday, July 30, 2014. The Q2 GDP estimates will be followed by the FOMC meeting announcement on what determines short-term interest rates in the US. On Friday, August 1, 2014, the US Department of Labor will report the status of non-farm payrolls and unemployment rates.

On Friday, July 25, 2014, the European Standard Brent crude gained 1.23%, or $1.32 a barrel, to end the week at $108.39 a barrel. The ICE Futures Exchange-traded crude improved 1.07%, or $1.15 a barrel, during the week. The spread between the Brent and WTI crude widened to $6.30 a barrel.

Source: Bloomberg
Source: Bloomberg

The WTI and Brent crude were last trading at $101.58 and $107.98 a barrel, respectively, at the time of reporting.

Natural Gas

US natural gas prices for September delivery declined 4.3%, or 17 cents per million British Thermal Units (BTU), to settle at an eight-month low $3.781 per million BTU as the US is likely to witness mild summer weather.

Source: Bloomberg
Source: Bloomberg

On Friday, July 25, 2014, natural gas prices lost 1.72%, or 6.6 cents per BTU, extending the weekly loss. The natural gas prices have reportedly declined in 7 of the last 10 weeks and over 20% in the last six weeks.

The natural gas prices had gained over 2% on Thursday, July 24, 2014. The EIA in its weekly reported stated that the US natural gas inventory rose by 90 billion cubic feet, which was below expectations of an increase of 96 billion cubic feet. Total US natural gas inventory stood at 2.219 trillion cubic feet for week ended July 18, 2014. It is still 23.5% below the five-year average of 2.759 trillion cubic feet.

The natural gas inventories have improved with 12 months of above-average gains. This in turn eases concerns of fuel storage during the harsh winter conditions. The natural gas inventory has risen by over 1.4 trillion cubic feet since the record low of 0.822 trillion cubic feet in March 2014.

Natural gas prices is likely to witness some more selling in the upcoming sessions as the AccuWeather-forecasting models has predicted cooler temperatures across most parts of the US over the next 10 days.

US Natural Gas was last trading at $3.771 per million BTU at the time of reporting.

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