U.S. Crude Tumbles as Factory Data Weighs

NYMEX-traded crude oil futures fell more than US$1 per barrel (/bbl) on Monday, pressured by weak U.S. factory data and a sinking stock market. U.S. crude notched its largest daily percentage loss in nearly a month, weighed down by steep losses in the stock market, which plunged after data showed the factory sector in the world’s largest economy expanded in January at its slowest pace in eight months. The Standard & Poor’s 500 sunk to its lowest level since October. West Texas Intermediate (WTI) for March delivery closed down $1.09 at $96.43/bbl, slipping below the 10-day moving average of $96.85/bbl for the first time since January 15. In European trading, Brent trended lower, but losses were capped by reports of output glitches at the North Sea Buzzard oilfield, the largest of the fields that contribute to the Forties crude blend and which underpins the Brent contract. Meanwhile, a fresh round of snowfall blanketed the U.S. Northeast – boosting heating oil futures – and Brent retraced losses. After establishing an intra-day and near three-month low of $105.40/bbl, prompt-month March Brent ended down 36¢ at $106.04/bbl. WTI’s further declines widened its discount to Brent crude to $9.61/bbl, from $8.91/bbl a day earlier.

Natural Gas Pressured by Warmer Weather

U.S. natural gas futures fell by nearly 1% on Monday on long-term forecasts for warmer weather after a lengthy cold snap caused a spike in heating demand and threatened to strain supplies. Front-month futures gained or lost at least 5% every day since January 23, and jumped more than 10% higher on two of those days. On January 30, the prompt-month erased more than 8%. NYMEX-traded gas for March delivery closed down 3.8¢ at US$4.905 per million British thermal units (/mmBtu). The February 2014 contract expired on January 29, moving March – generally a warmer month – into the front-month contract and contributing to the initial fall in prices. Most weather outlooks predicted colder-than-average temperatures to remain in much of the country before breaking in the 11- to 15-day range as warmer temperatures move in – primarily in the southern U.S. Elsewhere, early consensus estimates predict a drawdown in natural gas inventories of between 240 billion cubic feet (Bcf) and 281 Bcf. In the week to January 24, withdrawal from U.S. natural gas storage totaled 230 Bcf, according to the U.S. Energy Information Administration.