Commodities trading outlook: crude oil and natural gas futures

WTI and Brent futures were steady near four-month lows during midday trade in Europe today, after sliding on lackluster US gasoline demand last week. Meanwhile, natural gas futures climbed on rising US temps, despite forecasts of further massive builds for inventories.

WTI futures for September delivery stood at $97.97 per barrel at 15:02 GMT in New York today, up 0.09%. Daily prices ranged from $97.43 to $98.21 per barrel. Last week the US brand lost 4.2%, the largest weekly decline in seven months, pushing the September contract to a three-month low of $97.09 per barrel.

September Brent on the ICE in London had added 0.15% to trade at $105.00 per barrel. Daily low and high were at $104.52 and $105.24 per barrel, respectively. The Brent contract’s premium to its US counterpart was $7.03, after last week’s closing margin of $6.96. Brent dropped some 3.3% last week, with the September future reaching a four-month low of $104.39 per barrel.

US motor gasoline stockpiles rose to 218.2 million, a four-month high, last week, despite the US being in the middle of the peak driving season.

“Gasoline is helping put a lot of pressure on crude,” Gene McGillian, analyst and broker at Tradition Energy in Stamford, Connecticut, said for Bloomberg. “The fundamental picture remains weak. We have a lot of supplies but tepid demand.”

Crude oil inventories fell for a fifth week by 3.7 million barrels to 367.4 million in the seven days through July 25th, while distillate fuel stockpiles, which include diesel and heating oil, added 0.789 million barrels.

The private American Petroleum Institute (API) will post its weekly reading on US oil inventories for the seven days ended August 1 tomorrow, and analysts expect a figure of -4.40 million barrels for crude.

Meanwhile, concerns about Iraq’s output, the second-largest in the Organization of the Petroleum Exporting Countries (OPEC), have all but vanished, as the country’s main southern oilfields remain safe, while the big northern fields are also kept secure by the autonomous Kurdish state.

Fears over the conflict in Libya are already priced, as output is already at very low levels, the lowest in the OPEC, and things could hardly get any worse, traders say, shifting the focus towards economic figures and the demand side.

“Market participants are doing an excellent job of ignoring the geopolitical risks,” Commerzbank oil analyst Carsten Fritsch said in a note to clients. “The oil market has settled into a dangerous state of complacency.”

Natural gas

Natural gas futures for September were up 1.13% to trade at $3.841 per million British thermal units (mBtu). Prices ranged from $3.761 to 3.849 per mBtu, not far from the six-month low of $3.725. The blue fuel added about 0.3% last week.

NatGasWeather.com reported on Monday, that the northern and western US will see comfortably cool temps this week, with highs in the upper 70s to 80s. The southern states will remain quite warmer than normal, pushing highs to triple digits. Next week is projected to be warmer than this one, with rising temps in the whole country. The Midwest and Northeast, however, might be subject to incoming cooler Canadian systems, which could lower temps down to comfortable again late next week.

This weeks Energy Information Administration (EIA) report will reveal another significantly larger-than-average build for natgas inventories, analysts at NatGasWeather.com said. Last weeks injection was almost double the average at 88 billion cubic feet. The analysts also say, that the following weeks log will post more large gains, as the weather this week will allow for moderate cooling demand at most. Markets will struggle for direction, as temps will climb along with rising supplies.