Energy Commodities Continue To Rise On Cold Temperatures As Traders Ignore Chinese Data

Chinese HSBC PMI manufacturing data printed much lower than expected this morning. The preliminary China Purchasing Managers’ Index from HSBC for February fell to a seven-month low of 48.3 from January’s final reading of 49.5, as employment fell at the fastest pace in five years. “The building-up of disinflationary pressures implies that the underlying momentum for manufacturing growth could be weakening,” said Qu Hongbin, chief economist for China at HSBC.

Under normal circumstances a tumble in China would have resounding effects on commodities especially crude oil. In a surprising response WTI crude oil continue to climb this

morning gaining 35 points to trade at 102.46 continuing its recent uptrend paying little attention to lackluster data from the US, China and Japan. Yesterday, oil climbed for a second straight day on speculation that cold weather in U.S. might drive the demand for heating fuel. The US has been hit by a freak winter storm season, with the “polar vortex” bearing down on the Midwest and the east coast since the beginning of the year. The US has recorded record cold temperatures driving up residential demand. U.S. heating oil inventories drop in the last several weeks. Analysts believed the low temperatures that have driven up demand for heating would linger into March. Heating oil added 35 points to trade at 3.1052 hitting recent highs.

The EIA is scheduled to release its weekly inventory data later today. Analysts expected the stockpiles of distillate fuel, a category that includes heating oil and diesel, would decline 2.1 million barrels last week as a winter storm hit the northeast of U.S. About 25 percent of households in the northeast U.S. use heating oil to warm their homes, according to the EIA.

Brent oil is trading at 110.44 slightly in the red this morning after climbing on global geopolitical concerns. Brent oil remained above $110 a barrel, underpinned by political concerns in Africa and Venezuela.

If there is any benefit to the cold and seemingly endless winter, it’s that gasoline prices have remained relatively frozen. But an unwelcome spring thaw in prices has started. The national average for a gallon of gasoline increased more than 5 cents in the past week to $3.36 per gallon. In Pittsburgh, drivers are paying an average of $3.59 per gallon, an increase of more than 4 cents from the previous week. Supply concerns pushed the price of crude oil last week higher than $100 per barrel for the first time in 2014. Although the oil price slipped briefly this week, based on sluggish demand caused by the cold and snowy weather that kept motorists in their homes and off the roads, crude oil futures climbed to $103.31 per barrel Wednesday on the New York Mercantile Exchange. Gasoline prices typically rise in late February anyway, when production slows as refineries begin preparations for summer fuel blends.

Natural gas continued to hit new highs as the cold weather demand pushes up prices. NG is trading at 5.944 up by 393 points, each time that the commodity breaks a new high, technical selling pushes prices back down below to its support level and then the commodity rebounds again. Once natural gas breaks through the resistance at 5.95 it should see climbs towards the $6.00 level.