Energy Commodities Price Watch: Rising US Crude Output Drags WTI Down

on Jul 25, 2013
Listen, Thursday, July 25th: West Texas Intermediate (WTI) futures fell for a second day after a weekly government report pointed to a rise in US crude output. The Brent oil price also extended declines with investors focusing on yesterday’s disappointing manufacturing data from China, the world’s second-largest oil consumer. The natural gas price edged up after shedding more than one percent on Wednesday.

**WTI Price Declines after EIA Report**
WTI futures for settlement in September declined as much as $1.05 to $104.34 a barrel before trading at $104.64 on the NYMEX as of 13:48 BST. The contract dropped 1.7 percent on Wednesday after the US Energy Information Administration (EIA) said that US production rose to 7.56 million barrels a day last week, the most since December 1990. The EIA also reported that crude stockpiles decreased by 2.8 million barrels, matching the average estimate of analysts polled by Bloomberg. Stockpiles at Cushing, Oklahoma, the delivery point for WTI futures and the biggest US oil-storage hub, fell by 2.1 million barrels.

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“It seems that investors keep ignoring the oil fundamentals, despite the recent US oil inventories being fairly optimistic,” noted Myrto Sokou, an analyst at Sucden Financial Ltd, as quoted by Bloomberg.
As Reuters has reported, while last week the WTI price reached parity with Brent crude, today the spread widened to $2.25.
**China Data Continues to Weigh on Brent Price**

Brent futures for September delivery declined 65 cents, or 0.6 percent, to trade at $106.54 a barrel on the ICE Futures Europe exchange. The European benchmark declined for a second day after figures showed that manufacturing activity in China slumped to an 11-month low last month.
“China has been and remains the key driver of global oil demand, the dynamism of which has this year been lagging considerably behind the expansion of supply,” commented Carsten Fritsch of Commerzbank, as quoted by Reuters. “Weaker demand from China would thus cause the oversupply to increase even further.”

Fritsch also noted that with financial investors seeing that as an “opportunity to grab profits”, the oil price was “likely to remain under pressure for the time being”.
**Natural Gas Price Little Changed**
!m[Brent Price Slips below $107 on China Data](/uploads/story/4347/thumbs/pic1_inline.jpg)
Natural gas futures for August delivery added as little as 0.03 percent on the NYMEX to trade at $3.70 per million British thermal units as of 09:55 EDT. As Reuters has reported, while most traders expect mild temperatures in power-consuming US regions to continue to weigh on prices, some have said that a stir in tropical activity this week served as a reminder that the US hurricane season was still ahead.

The US National Hurricane Centre reported that Tropical Storm Dorian had strengthened while moving across the Atlantic on a westward path. Thomson Reuters unit Weather Insight noted that there was a 50 percent chance that the system would develop into a hurricane but only a ten percent chance that it would move into the Gulf of Mexico where it could potentially disrupt offshore energy production.


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