Is The Rally Over For Crude Oil And Natural Gas?

Nymex crude oil prices declined around 1.4 percent Monday on the back of unexpected decline in Chinese exports increasing concerns over the economic growth in world’s second largest economy. Further, Libya restarting its oil production and pumped around 275,000 barrels of oil yesterday exerted downside pressure on the prices. Further, strength in the DX along with weak industrial production data from eurozone acted as a negative factor. Crude oil prices touched an intra-day low of $100.85 and closed at $101.12 in yesterday’s trading session. This morning in Asian trade crude oil gained 15 cents to trade at 101.28 well off of last Mondays range close to the 105 price level. Brent oil recovered 20 cents to hold at 107.53 with the spread uncomfortably close to $6.00 well below its normal range of $12.00. China’s total crude oil imports in the first two months of the year rose 11.5 percent from a year earlier to 51.21 million tons, data from the General Administration of Customs showed on Saturday.

The American Petroleum Institute (API) is scheduled to release its weekly inventories today and US crude oil inventories are expected to gain by 2.2 million barrels for the week ending on 7th March 2014. Gasoline stocks are expected to decline by 2.2 million barrels and distillate inventories are expected to plunge by 1.1 million barrels for the same week. For the daily perspective, traders can expect crude oil prices to trade on a mixed note on the back of expectations of rise in API crude oil inventories will exert downside pressure on the prices. Further, restart of Libyan crude oil production and producing more crude oil will act as a negative factor. Additionally, forecast for weak manufacturing and industrial production data from UK will continue with downside movement in the prices.

Last week oil price (WTI and Brent) remained nearly flat. As a result, the difference of Brent oil over WTI moderately narrowed: The premium ranged between $5.97 and $6.42. Last week, the EIA’s weekly update showed a modest rise in oil’s stockpiles of 2.2 million barrels. This week, several reports may affect oil prices. These items include: U.S retail sales, China’s industrial production, IEA monthly update, OPEC monthly report, and EIA oil weekly update.

The gap between Brent and WTI oil slightly narrowed again last week as it ranged between $5.97 and $6.54 per barrel. During the week, the premium dropped by $0.06 per barrel. The oil stockpiles rose by 2.2 MB and reached 1,730.8 million barrels. The linear correlation between the shifts in stockpiles has remained stable at -0.191: this correlation suggests that oil price, assuming all things equal, may slightly fall next week according to Reuters.

As Russia tightened its grip on Ukraine’s Crimea region this month, U.S. and European Union officials were urging the Obama Administration to speed up approvals of more liquefied natural gas (LNG) export terminals. Natural gas climbed on bargain hunting after declining steadily last week. This morning NG is trading at 4.664. At this point weather forecasts show a bit warmer temperatures while traders wait for this week’s inventory on Thursday in the hopes of additional declines.