Crude & Brent, Gasoline and Natural Gas All In The Red

Crude oil eased on Tuesday after US data printed below forecasts casting a shadow on the recovery on the US economy. Crude oil traded in the red at 98.68 and continued to trade down this morning at 96.48 ahead of inventory numbers due today and tomorrow. The American Petroleum Institute will release its weekly report due later today, with crude oil stocks expected to show a gain of 3.5 million barrels for the week, according to Platts. A day later, the U.S. Energy Information Administration will post its weekly data. According to data from the U.S. Energy Information Administration, U.S. crude oil inventories rose by 5.2 million barrels last week, the fifth largest build of the year, with stocks at the Cushing hub rising for the second week in a row. Over the past four weeks, inventories have risen by 22 million barrels, marking the biggest four-week build since April 2012 and the second largest since February 2009. The crude oil stored at Cushing, the delivery point for the U.S. futures benchmark contract, amounted to 33.34 million barrels in the week that ended Oct. 18, an increase of 358,000 barrels. As noted in an article in the FT, certainly flows of shale oil have been surging from areas such as Bakken, North Dakota and Eagle Ford, Texas, where output has reached 1 million barrels a day. The price of gasoline fell 6.6 cents to $3.294 a gallon in the week ended Monday, the Energy Information Administration said. That’s the lowest price since Dec. 24, 2012. The drop, which was the largest in a month, follows a slim 0.6 vent gain a week earlier. The decline in pump prices comes as gasoline futures have recovered only modestly from last week, when they hit their lowest level since June 2012 on weak demand and high inventory.

In its most current short-term energy outlook, the EIA projected gasoline prices will average $3.42 a gallon this month, down from $3.75 a gallon a year earlier. Gasoline supplies have built up as refiners have in recent months been boosting refinery operations to make more diesel fuel, which is in great demand in foreign markets. Higher processing also yields more gasoline which has lesser demand in foreign markets and has been building up in domestic inventories, weighing down prices. The forecast is based on Nymex crude-oil futures averaging $103 a barrel, up from $89.49 a year earlier. Nymex crude is averaging $101.07 a barrel so far this month amid weak demand during refinery maintenance season.

Brent oil is trading down 24 cents this morning at 109.22. With maintenance schedules winding down and lower prices encouraging refiners to stock up to meet export demand, expect the differential between WTI and Brent to narrow. As Brent is constrained by reduced Libyan and Nigerian shipments, it seems more likely for WTI to rise than for Brent to fall.

Natural gas is trading at 3.648 down by 15 pips as the commodity looks for a bottom to sit between seasons as prices fluctuate on changing weather forecasts. Traders are looking for the most recent inventory report due on Thursday which is expected to show a continued climb in stocks.