U.S. Crude Futures Tumble on Inventory Data
NYMEX-traded crude futures fell by more than 2 percent on Wednesday – its largest drop in two months – after the United States announced unexpected plans for a test release of strategic oil reserves. Upside momentum also came from weekly data showing a significant build in domestic crude supplies. The U.S. Department of Energy surprised markets by announcing plans to sell up to 5 million barrels of crude oil from the Strategic Petroleum Reserves (SPR) to test the capabilities of the nation’s emergency stockpile. Elsewhere, the U.S. Energy Information Administration (EIA) said commercial crude inventories rose by 6.2 million barrels in the week to March 7 – nearly triple expectations – as many refineries remained idle for seasonal work at the peak of the spring maintenance season. West Texas Intermediate (WTI) for April delivery retreated $2.04 to settle at US$97.99 per barrel (/bbl), well below the 50-day moving average of $98.32/bbl. European benchmark Brent ended at $108.02/bbl, down 53¢ – widening the closely-watched Brent-WTI spread for a third day – but traders remained focused on the U.S. contract after a double dose of bearish supply news. Brent’s premium over WTI finished $1.51 wider at $10.03/bbl, its widest settlement since mid-February. The spread narrowed to as narrow as $5.44/bbl on March 5, its tightest point in nearly five months.

Natural Gas Slips Another 2.5% on Mild Weather
U.S. natural gas futures retreated another 2.5% on Wednesday on forecasts for less cold weather that should pare heating demand over the next two weeks. NYMEX-traded natural gas for April delivery fell 11.5¢ to close at US$4.49 per million British thermal units. Gas prices have spent nearly two weeks consolidating above a five-week low at $4.441/mmBtu, as traders balance the remaining weeks of winter heating demand and forecasts that storage levels will fall below 1 trillion cubic feet (Tcf) for the first time in more than a decade against indications of increasing gas-to-coal switching and near-record natural gas production levels. The U.S. Energy Information Administration (EIA) on Tuesday raised its estimate for 2014 U.S. natural gas production to a record 71.96 billion cubic feet (Bcf) per day and projected gas in storage would end the winter season at 965 Bcf. By the start of next winter, the EIA said nearly 2.5 Bcf will be injected to rebuild end-of-October inventory to 3.459 Bcf. The agency said higher gas prices should spur production and reduce demand for gas from the power sector. And while below-normal temperatures are expected in parts of the country over the next few days, longer days overall and milder weather in the South should help take some pressure off the market, according to market observers.