Crude oil trading outlook: futures regain some losses; Ukraine still bullish

Early European trading hours saw both West Texas Intermediate and Brent futures recover losses from last session, when a bearish report on US crude supplies hit hard on the market, erasing earlier gains. Ukraine remains the only firm support of crude prices.

WTI futures for June traded for $101.77 per barrel at 7:13 GMT on the New York Mercantile Exchange, a growth of 0.33% since yesterday, the high and low of the day stood at $101.81 and $101.48, respectively. US crude lost 0.30% in the last session and a further 1.83% on Tuesday, on bearish news from China.

Meanwhile on the ICE, Brent futures for June kept steady to register a price of $109.35 per barrel at 7:13 GMT, adding 0.22% for the session so far. Daily prices ranged from $109.18 to $109.47 per barrel. Brents premium to the US benchmark was at $7.58.

Yesterday the Energy Information Administration reported crude oil supplies in the US were at their highest level on record, pushing hard on crude prices. Inventories rose by 3.524 million barrels in the week through April 18th, to reach 397.7 million, exceeding expectations of a 2.3-million barrels increase. Crude imports and domestic production outpaced refinery utilization rate, even though it also picked-up pace, to score 91.0%, up from last week’s 88.8%.

Motor gasoline and distillates figures also fanned significantly negative sentiment, with gasoline inventories having dropped by 0.274 million barrels for the week, far below the expectation of a 1.713-million decline, while distillate fuels gaining 0.597 million barrels in supplies, in contrast to a forecast of a 0.463-million decline.

The only positive sign for oil coming from the report was that supplies at Cushing, Oklahoma, dropped to 26.0 million barrels, down 800,000 from last week’s reading. This was the lowest level since October 2009. The decline, however, is in-line with recent outflows from Cushing and towards the Gulf coast, where hubs registered supplies of 209.6 million barrels – the highest level since 1990.

Also fanning bearish sentiment, Iraq is reporting increasing exports from its southern terminals, which averaged 2.55 million barrels per day, pushing record figures from 1979.

Ukraine remains the only strong support for oil prices, as tensions remain strained, following the resumption of the interim governments “anti-terrorist” operation in the East, and in light of military exercises by NATO in Eastern Europe. Sergei Lavrov kept the firm tone, saying that if the interests of Russians have been attacked directly… [Russia will] respond in full accordance with international law.”

The US had asked Moscow to persuade pro-Russian separatists to leave occupied buildings and make amends towards deescalating tensions in Ukraine, though president Obama said on Tuesday that the Kremlin had failed to halt militants.

Meanwhile, the UK reported that Russian aircraft were detected approaching northern Scotland, with the Netherlands, Denmark and the United Kingdom all sending jets to escort the approaching aircraft away from their airspace.

Earlier in the week, the US benchmark was down on news that manufacturing activity in China registered a lower-than-expected PMI. According to HSBC’s preliminary report released on Tuesday, the Chinese manufacturing PMI recorded at 48.3 for April, in contrast with a 48.4 forecast. This translates to a slightly lower-than-before pace of slowdown in the world’s second oil consumer, but also boosts negative sentiment, as the reading is worse than the forecast and is still well-below the “50” contraction-expansion figure.

Technical view

According to Binary Tribune’s daily analysis, in case WTI June crude manages to breach the first resistance level at $101.95, it will probably continue up to test $102.45. In case the second key resistance is broken, the US benchmark will probably attempt to advance to $102.83.

If the contract manages to breach the first key support at $101.07, it will probably continue to slide and test $100.70. With this second key support broken, the movement to the downside will probably continue to $100.19.

Meanwhile, Brent will see its first resistance level at $109.57. If breached, it will probably rise and test $110.02. In case the second key resistance is broken, the European crude benchmark will probably attempt to advance to $110.51.

If Brent manages to penetrate the first key support at $108.63, it will likely continue down to test $108.14. With the second support broken, downside movement may extend to $107.69 per barrel.