WTI Crude Trims Weekly Gains, Natural Gas Extends Slide

Edited by Vani Rao

Improving dollar, higher US crude oil supply pull down crude prices

Crude Oil

On Thursday, March 20, 2014, US crude fell $1.47 to end at $98.90 a barrel on the New York Mercantile Exchange (NYMEX). Light, sweet crude prices rebounded after hitting an intra-day high of $100.82, the highest since March 12, 2014. WTI crude gained 1.5% during the first three sessions of the week.

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The US benchmark crude gained 0.7% on Wednesday, March 19, 2014, after the US Energy Information Administration (EIA) reported a decline in crude inventory at Cushing, Oklahoma.  The crude inventory at Cushing fell 989,000 barrels to 29.8 million barrels, the lowest since January 2012 and the seventh consecutive week of decline.

The EIA stated that total US crude inventories grew 5.85 million barrels to 375.9 million barrels, the highest level since November 29, 2013. Domestic crude production climbed 33,000 barrels a day to 8.22 million barrels a day, the highest since 1988. The growth in crude inventories can be mainly attributed to the increasing availability of shale gas by horizontal drilling and hydraulic fracturing or fracking in the US.

WTI crude fell 1.47% as the dollar rose against the Euro for the second day in a row after the Federal Reserve’s likely interest rate hike around six months after the stoppage of its monetary stimulus. After its two-day monetary policy review, the Fed has announced a $10-billion cut to its monthly monetary stimulus package to $55 billion.

On the other hand, Brent crude rose on concerns of rising geopolitical tensions between Ukraine and Russia. Russian President Vladimir Putin has signed an accord to absorb Crimea, which is largely criticized by the West. In a recent action, pro-Russian armed forces have annexed Ukrainian military posts in Crimea.

The US and the EU are likely to impose more sanctions on Russia for not respecting Ukraine’s international border. All eyes will be on Russia’s retaliation move as the world’s largest crude and gas exporter caters to most of the oil and gas demand in the European nations.

On Thursday, March 20, 2014, the European benchmark crude gained 60 cents, or 0.56%, to $106.45 a barrel. The crude oil spread between the Brent and WTI crude stood at $7.55 a barrel.

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The WTI and Brent crude were last trading at $98.31 and $106.09 a barrel, respectively, at the time of reporting.

Natural Gas

On Thursday, March 20, 2014, natural gas prices fell to its eight-week low as stockpiles decreased lower than Bloomberg estimates.

April delivery for natural gas futures on the NYMEX declined more than 2.56%, or 11.5 cents, to settle the day at $4.383 per million British Thermal Units (BTU). Natural gas April futures have fallen more than 1.06%, or 5.5 cents, during the week.

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On Thursday, March 20, 2014, the EIA reported that natural gas stockpiles for the week ended March 14, 2014 declined 48 billion cubic feet against Bloomberg analysts’ expectation of a 59 billion cubic feet decline. US total natural gas stockpiles stood at 953 billion cubic feet, below the five-year average of 1.829 trillion cubic feet, and the lowest since 2004, for this period in 2014.

Natural gas demand has eased with the onset of the spring season and milder weather conditions. Spring has always been a lean season for natural gas demand, as there is no extreme temperature to hike the gas demand for heating or air conditioning purposes.

US Natural Gas was last trading at $4.323 per million BTU at the time of reporting.

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