Fundamental Update for Crude Oil and Natural Gas

By FX Empire Analyst - Barry Norman
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Crude oil futures prices for the month of October are heading for its last four month’s high near $99/bbl in electronic platform. Optimism from FOMC meet declaration on yesterday is reflecting on the global market, where Asian equities are up by more than one and half percent on average. Federal Reserve Bank has kept the interest rate unchanged at 0.25 percent and planned to purchase $40 billion in MBS every month. Thus Fed’s asset purchase program or stimulation for economy is supporting oil futures on expectation of rising demand in world’s largest economy. During Asian session, we may expect oil futures prices to open in a higher note ahead of concern of declining industrial production of third largest energy consumer Japan. However, Euro-zone inflation numbers in the form of Consumer Price index may increase, which may support oil prices to take positive cues during European session.

The US session is loaded with number of economic releases where most of the indicators are likely to paint a growing economy picture.

News and rumors are bound to hit the airwaves on the release of the strategic reserves, moving to higher levels. With the fresh round of QE introduced by the FOMC yesterday, the Obama Administration will be forced to act, to hold energy prices down to keep consumer confidence up before the elections.

As per National Hurricane Center, tropical storm Nadine is just below hurricane strength, which may create supply disturbances in PADD III region. Another tropical storm Kristy is also near to PADD V region may have impact on production and refining units, which may again support oil prices. Thus, oil prices may take positive cues out of this.

Most importantly, geopolitical issue related to Middle East – Libya which may continue to act as a catalyst for the upside movement. Libya, since the revolution has increased oil outputs and any disruption or possible terrorism and tensions could see oil skyrocket.

Natural gas prices were about the only commodity that did not seem to benefit by the introduction of new monetary policies by the Fed, remaining just above 3.00 before and after the statements yesterday. NG is trading below $3.03 with a marginal loss in this morning. As per US energy department, natural gas storage has been increased by 27 BCF, higher than survey. Inventories are currently 342 Bcf (11.1 percent) greater than last year at this time and 284 Bcf (9.0 percent) greater than the 5-year average. Weekly demand has been declined by 4.9 percent in the last week.

Thus, weak fundamental report may weigh on gas prices movement for the day. Similar to crude oil, NG is subject to supply disruption due to the possible weather in the gulf. Natural gas prices may take positive cues out of this, ahead of rig counts data releases tonight.

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