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Commodities Energy

Oil and natural gas daily review (May 22, 2014)

May 22, 2014, Thursday, 07:28 GMT | 03:28 EST | 11:58 IST | 14:28 SGT
Contributed by Angel Broking


Crude Oil

WTI oil prices gained by more than 1.5 percent in yesterday’s trading session and touched a one month high after the EIA report released last night showed large draw in commercial crude stocks, while renewed fighting in Libya that kept output low boosted Brent prices.

Explosions and fighting were heard in Tripoli on Wednesday, two days after gunmen stormed parliament amid a surge in violence in the OPEC member country. National output in Libya edged higher to 230,000 barrels per day (bpd), up from 210,000 bpd on Monday but still a fraction of the 1.6 million bpd the country produced before the 2011 war. Two large oilfields were still shut 10 days after the government said protests there were over.

EIA inventory update

The EIA released its weekly inventories report last night at 8:00pm IST and US crude oil inventories declined by 7.3 million barrels for the week ending on 16th May 2014. Gasoline stocks rose by nearly 1 million barrels whereas distillate inventories rose by 3.4 million barrels for the same time period.


Natural Gas

U.S. natural gas futures ended down almost 2 percent on expectations for a bigger than normal storage build despite forecasts for much stronger than normal cooling demand.

Analysts forecast utilities added 102 billion cubic feet of gas into storage last week, well above the year-before and five-year average builds of 90 bcf. The U.S. Energy Information Administration will release its gas storage report at 8 PM IST and inventories are expected to show a surplus.


Outlook

On an intraday basis, we expect crude prices to trade stronger on the back of escalation of violence in Libya coupled with reports from the EIA that crude inventories have shown a surprise drop as against the expectations of a buildup.

Besides, the output in Libya is still a fraction of total capacity of 1.6 million bpd, creating a supply side constraint in the crude market boosting prices.

On the MCX, crude prices are expected to trade on a positive note taking cues from international markets and rupee weakness.

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