WTI steady above $103 ahead of EIA’s reserves report

West Texas Intermediate dropped below $103 per barrel during Asian trading as concern over oil transportation through the Suez Canal and the Suez-Mediterranean Pipeline eased after interim Egyptian president Adly Mansour set a speedy timetable for the next parliamentary elections. The American benchmark however rebounded to trade well above $103 per barrel during the early European session ahead of EIAs crude oil inventories report on Wednesday, which should show a drop. Brent jumped back above $107 after tumbling during Asian trading.

On the New York Mercantile Exchange, WTI crude for August delivery traded at $103.19 per barrel at 7:13 GMT, up 0.06% on the day. Prices held in range between days high and low of $103.39 and $102.79. Light, sweet crude hit a 14-month high yesterday, followed by a drop as tension in Egypt eased. WTI settled 0.7% lower on Monday and is so far marking a minor weekly decline of around 0.1% after closing 7.29% higher last week, the highest since February 2011.

Meanwhile, on the ICE Futures Exchange, Brent oil for August delivery traded at $107.28 per barrel at 7:14 GMT, down 0.14% on the day. Priced ranged between daily high and low of $107.49 and $106.91 respectively. The European benchmark fell below the $107 mark during Asian trading, after which a rebound towards days high followed in the European session. Brent settled 0.63% lower yesterday and has declined 0.3% so far this week after posting a 5.59% weekly advance the previous one.

Egypt unrest eases but remains in focus

Oil marked record high weekly gains last week as political tension in Egypt escalated. After last Wednesday Egypt’s now ex-president Mohammed Mursi was forced from power by Egypt’s army, clashes between supporting protesters and Egyptian security forces left more than 50 people dead on Monday. Market players were spooked that continuing and expanding conflicts might disturb shipments and flows of oil through the state-controlled Suez Canal and Suez-Mediterranean Pipeline. However, officials said that traffic through the waterway was undisturbed.

Yesterday, Egypts interim president Adly Mansour sought to dampen further escalation of conflicts by setting a timetable for parliamentary elections within seven months after amendments to the countrys constitution are approved in a referendum.

Meanwhile, Libyas Sharara oilfield is expected to resume operations after an agreement was reached with the armed group that shut it down in the end of June.

Vyanne Lai, an economist at National Australia Bank, said for Reuters: “The prices have tracked so much higher in the past few weeks because of firstly the Syrian civil war escalation and then the Egyptian crisis. So oil prices have built up to a point that, unless there are more major news about intensifying Middle East conflicts, youre likely to see some form of correction.”

Oil reserves eyed

This weeks oil reserves report will be crucial for supporting the current high level of oil as Feds intentions to taper its monetary stimulus and easing geopolitical concern are weighing on prices. According to a Bloomberg survey, crude oil inventories probably fell by 3.1 million barrels in the week ending July 5. Gasoline stockpiles are expected to have risen by 1 million barrels and distillate fuel reserves should have gained 1 million as well. Refineries probably operated with a 0.25% increased capacity after hitting the highest level of 92.2 since August in the preceding week.

The industry-funded American Petroleum Institutes weekly oil reserves report is due today and will give some information prior to the government statistics tomorrow. However, APIs report is considered less reliable as it is based on voluntary information from operators of bulk terminals, pipelines and refineries.

David Lennox, a resource analyst at Fat Prophets in Sydney, said for Bloomberg: “The most recent reported U.S. stockpile decline was quite substantial and a further draw-down of that magnitude might certainly give the market good reason to stay well over $100.”

China in focus aswell

Higher than expected inflation from the worlds second biggest oil consumer was reported today, limiting the room for the PBOC to loosen money supply in order to induce growth in the slowing economy. Chinas annual consumer inflation rose to 2.7% as food costs surged. Investors are awaiting upcoming data from the Asian country that might show growth is headed to a 23-year low, in line with previous GDP downward revisions. Any signs of expansion or contraction of Chinas economy cause wide fluctuations to the commodities market as the country is between the top consumers of most of the raw materials.

Vyanne Lai said for Reuters: “The 2.7 percent is still generally a benign number when in 2010 it went up to much more than that, so I wouldnt think its something to herald about as fundamentally the Chinese economy is slowing and industrial data recently pointed out to contracting manufacturing and industrial production.”