Hurricane and Inventory Pressurize Energy Prices

WTI oil prices are trading at 90.00 a barrel with a marginal gain from last three day’s consecutive fall. Yesterday, Nymex crude oil settled below $90 a barrel for the first time in almost eight weeks as the government reported lower oil demand and on concern the worsening European crisis will reduce consumption. Prices declined for the seventh time in eight days after the Energy Department said total U.S. fuel use decreased 1.1 percent in the four weeks ended Sept. 21 and inventories remained at the highest level for this time of the year since 1990.

Speculation of easing by second largest oil consuming nation China have come up as its industrial profit fell for the fifth month in August. This morning the People’s Bank of China has injected a further 180 billion yuan into the Chinese financial system through reverse repo operations This announcement gave a little recovery in Asian equities market is seen as well as in oil prices. Expect gains to be limited and may come under pressure afterwards ahead of Spain’s budget announcement today.

Two major events to be watch out for today and tomorrow in the form of Spain’s new round of austerity measures for 2013 which will be announced on today. Thereafter, result of Spain stress test on Friday. The euro is likely to remain under pressure for the day ahead of these two major events.

US energy department reported that demand for gasoline and distillate has been increased by 2 and 1 percent respectively in the last week. However, production has increased by more than 4 percent though refineries capacity utilization declined. Higher production may continue to weigh on oil prices.

The National Hurricane Center said that there is 40 percent chance of tropical cyclone formation near to PADD V region, which may create some concern of supply disturbances and may add some points on higher side. However, concern of major nation’s economic growth is likely to have negative impact on oil prices.

During US session, oil prices may remain under pressure amid lower US economic releases. Yesterday new home sales printed under forecast, which may way on today’s housing market releases.

This morning natural gas prices are trading above $3/MMBTU with gain of more than 0.20 percent in Globex electronic platform. The National Hurricane Center reports that tropical storm Miriam has reached category 2 level of Hurricane near to PADD IV region accounts for more gas production in US. There is another 40 percent chance of tropical cyclone formation near to PADD V region, which may create some concern of supply disturbances and may add some points on higher side.

MDA Earth Sat, another leading weather forecaster, said the 6 to 10-day forecast period would see cooler temperatures. Speculation of rising demand for space heating purpose may support gas prices to trade on higher side.

The all important EIA inventory report is due late today and storage is likely to increase by 78 BCF, which is lower than last year injection at the same time. Ahead of natural gas storage data from US energy department, we may expect gas prices to continue its upside trend for the day.