Natural Gas Gaining Users As Crude Oil Hit Highs

This morning data released in China is the main focus of the commodities markets. The National Bureau of Statistics reported that consumer prices were only up 2.6 percent in August from a year earlier, compared to a 2.7 percent increase in July. At the same time, deflation slowed in producer prices, which fell only 1.6 percent in August after tumbling 2.3 percent in July. The Chinese trade and inflation data, and recent surveys showing more bullish sentiment among purchasing managers in China, are starting to give hope to those who argue that the gloom these days about Asian economies, particularly China’s, is excessive. The turnaround in China and the stronger data is helping to support crude oil and Brent oil prices Crude oil eased by 27 cents this morning to trade at 110.27 after surging at the end of the week, while Brent oil has climbed by 24 pips to trade at 116.14 with the spread remaining close to the $6 range.

Global oil prices remain elevated on geopolitical tensions centering on Syria, the US and Russia as President Obama and President Putin wrestle. Russian President Vladimir Putin pledged to help its long-time ally in the case of an attack, causing global oil markets to tremble, and saw West Texas intermediate crude rise for the second day in a row on Friday. Traders became fearful that such a declaration of intent is a sign of increasing tensions, and an indication that some form of conflict with the potential to disrupt Middle East oil exports, is imminent. Delays on such an action, due to a lack of foreign support and Obama’s desire to seek approval from Congress before making any calls to arms; have prevented oil prices from soaring excessively. Congress will meet to discuss a plan of action for Syria on the 9th September, at which point oil markets could begin to react more violently.

Crude oil hit a 28-month high Friday owing to tensions between the US and Russia over a potential military strike against the Assad regime for its alleged use of chemical weapons against its own people.

Natural gas gained 20 pips this morning to trade at 3.551, while summer slowly comes to an end traders are hoping warmer temperatures will extend throughout the month increasing residential demand. The high price of crude oil is pushing many commercial users including truckers and delivery services to look for easy ways to convert their fleets to natural gas, which is now the cheapest energy supply and with freckling is available in ample quantities.  Brand-new natural gas pumps in places like Mesquite and Midland sit mothballed alongside their diesel counterparts, waiting for enough trucking companies to sign on that it make sense to flip on the switch and begin delivering fuel. Gaslone prices continue to climb, trading this morning at 2.84 which puts costs close to $5 at the pump more and more energy consumers are looking for alternatives.

Already the fuel of choice for new power plants, natural gas is considered a potential replacement to diesel fuel within the transportation industry. Garbage trucks and city bus fleets are already shifting over in significant numbers. And in the past six months, trucking executives have been jumping over each other with announcements. Peterbilt began full production on a natural gas model at its plant in Denton last month, and companies including Procter & Gamble are pledging to shift their trucking budgets away from diesel.