Energy Speculators Dumping Crude Oil As Prices Trade Under $100

WTI crude oil continues to tumble giving up 78 cents this morning to trade at 99.25. It seems that energy speculators have just turned their backs on oil after pushing it a week ago to 105.00. Brent oil eased but not nearly as strongly to trade at 107.46 with the spread widening to over $8. As reported last evening in our daily forecast, when the spread narrows as tightly as it had, there was an indication that the markets were out of balance and that crude prices were set to fall.  Traders also looked ahead to this week’s updates on U.S. petroleum inventory levels. Industry group the American Petroleum Institute released its supply report late Tuesday. The API inventory showed a climb of 2.6 million barrels in crude supplies for the week ended March 7. The increase was a bit more than expected as analysts surveyed by Platts had forecast a rise of 2.3 million barrels. Sources also said the API reported gasoline stockpiles fell nearly 2.2 million barrels, while distillate supplies declined 839,000 barrels. Analysts were looking for gasoline stockpiles to decline by 1.8 million barrels and distillate supplies to fall by 900,000 barrels.  Early in the US session the EIA will release the official US inventory report. Lately there has been a significant difference between the API estimates and the EIA actual, which could cause some market volatility.

Analysts polled were looking for an increase in crude stockpiles of 2.3 million barrels for the week ended March 7. Last week, the EIA reported a rise of 1.4 million barrels in crude supplies, largely in line with expectations. The supply data for the most recent week is also expected to reflect a decline in gasoline stocks by 1.8 million barrels, and a fall of 900,000 barrels in distillate stocks. Distillates, which include heating oil, last week unexpectedly moved higher.

Brent futures fell towards $108 a barrel as demand growth concerns at the world’s two biggest oil consumer’s overshadowed fears of supply disruption with geopolitical tensions over Ukraine worsening. Investors are now awaiting fresh economic data from China to gauge the country’s oil consumption outlook after surprisingly weak trade numbers. Markets are awaiting a slew of data from China on Thursday, including industrial output, retail sales and urban investment to get some clarity on where the economy is heading. China’s economic uncertainty is weighing across risk assets such as Asian shares, with industrial commodities, particularly copper and iron ore, the hardest hit.

Natural gas prices added 33 points as traders try to buy up the commodity on the bottom ahead of Thursday’s inventory and the hopes for one last winter blast. Natural gas is trading at 4.621. Calls intensified for the US to expedite approval of the liquefied natural gas exports making their way through regulators, as one US senator vowed to make those approvals a part of an economic assistance package to Ukraine. During the beginning of October 2013 to the end of February 2014, US average heating degree days were 13% higher than last winter and 10% above the 10-year average, affecting mostly households in the Midwest that primarily use propane and those in the Northeast that rely on heating oil. US natural gas inventories will end the heating season below 1 tcf for the first time since 2003 because of large withdrawals of gas this winter to meet high heating demand. EIA expects growing gas production and moderate demand from the electric power sector will allow for a record build in gas stocks during the April-September injection season.

EIA expects total gas consumption will average 71.3 bcfd in 2014, a drop of 0.1 bcfd from 2013, due to higher gas prices and declines in gas used for power generation. Gas-marketed production will increase an average 2.5% in 2014 and 1.1% in 2015, according to the outlook.