Oil Inventories Continue To Climb As Prices Drop

The US Energy Department (EIA) is scheduled to release its weekly inventories report early in the North American session and US crude oil inventories are expected to rise by 2.2 million barrels for the week ending on 25th October 2013. Gasoline stocks are expected to drop by 0.1 million barrels whereas distillate inventories are expected to plunge by 0.3 million barrels for the same period. Crude oil continued to ease this morning giving up 49 cents to trade at 97.71 as weak US data is reducing demand for oil consumption and increased production continue to push up stocks. Yesterday the American Petroleum Institute (API) report showed that US crude oil inventories increased more than expected by 5.9 million barrels to 381.30 million barrels for the week ending on 25th October 2013. Gasoline inventories rose by 740,000 million barrels to 222.10 million barrels and whereas distillate inventories fell by 2.7 million barrels to 122.50 million barrels for the same week. Crude oil inventories will be released in the early morning but markets will remain focused on the Federal Reserve statement and their assessment of the US economy. A dovish statement could weigh heavily on the demand and price of crude oil. Brent oil is trading at 108.78 slightly in the red but is being well supported by a jump in industrial production in Japan. The impact of the ongoing FOMC meeting in the US is visible in the global market. This morning Asian markets are robustly up while the Forex US dollar has appreciated against most of its rivals. The euro has shred its previous gain and at present trading at $1.3740. Likewise, the U.K. currency, the Japanese yen and many others are also in the negative territory. News released yesterday from the US indicated that the country’s lawmakers are considering new sanctions against Iran which could slash the OPEC oil member’s exports by 50% over the next year. Analysts primarily attributed the rally in Brent crude futures to reports of plunging Libyan production stemming from political instability and labor strikes at that country’s oil export terminals. The latest concerns stemmed from a labor protest at El Sharara field although observers expect that protest to end soon.

Two of the most volatile oil producers—Libya and Iraq—experienced serious unrest over the weekend. In Iraq, multiple bombing attacks targeted commercial areas, killing dozens of people, authorities said. Meanwhile, Goldman Sachs maintained its near-term Brent price forecast of $110, saying any additional disruptions in Libya could drive prices higher. Exports from Libya have been hit drastically due to protests by workers at the ports. However, Libya’s Prime Minister expects one of the ports with capacity of 1, 10,000 bpd to reopen next week, easing supply concerns from the OPEC region. Crude oil prices are expected to go down as expectations of higher inventories and easing supply worries from Libya can hurt prices.

Natural gas futures ended lower on Tuesday 3.65 but eased again this morning to 3.63 on mild weather forecasts for the week. Prices are expected to move down further today. Front-month gas futures on the New York Mercantile Exchange ended down 0.87 percent per million British thermal units. Natural gas remains in the headlines with new projects and increase demand for exports as it is steadily cutting into coal usage, but increased demand remains years ahead as the DOE withheld approval on projects for a long time, and has just recently approved the projects to begin terminals and export functions. Natural gas is quickly becoming the number favored energy product.