Crude oil trading outlook: futures steady after losses on growing supplies in the US

Crude oil contracts orbited yesterdays close during early trading in Europe today. Both West Texas Intermediate and Brent continued to lose on Thursday, after a significant build-up in supplies in the US was reported on Wednesday.

West Texas Intermediate futures for delivery in June traded for $99.52 per barrel at 7:17 GMT on the New York Mercantile Exchange, adding 0.10%, daily prices between $99.17 and $99.55 per barrel. The US crude benchmark lost 0.32% yesterday, after dropping 1.52% the previous day with news of record-high inventories in top consumer US.

Meanwhile on the ICE in London, Brent futures for settlement in June recorded a 0.17% gain to trade for $107.94 per barrel at 7:19 GMT, prices ranging from $107.60 to $107.97 per barrel. Brent’s premium to WTI stood at $8.42. The European brand fell by 0.29% yesterday, after further 0.80% on Wednesday, following its US counterpart, though with less momentum.

Data from the weekly Energy Information Administration report on Wednesday showed significant gains for crude oil, gasoline and distillates supplies in the US. Crude added 1.698 million barrels, to register the highest figure on record of 399.4 million barrels in storage. Meanwhile, gasoline supplies have increased by 1.564 million barrels, over expectations of a 0.6 million barrels decrease, while distillates gains were at 1.936 million barrels, well-ahead of a projected 0.583 million barrel rise.

“Inventories are clearly starting to have an impact,” said for Bloomberg Michael McCarthy, chief strategist at CMC Markets in Sydney. “It’s the supply side that’s driving oil prices at the moment.”

Traders now await key data on employment for the US later today, and a Reuters poll suggests payrolls increased the most in five months in April. Also today, data on manufacturing PMI for the Eurozone is due, while on Monday HSBC will release its final reading on factory activity in China. Solid figures in the EU are expected to support oil demand outlooks, while HSBC is probably going to repeat its preliminary data, which showed a contraction in China.

Elsewhere, the Zueitina oil-exporting port in Libya began loading its first tanker yesterday. The terminal was closed for nearly a year due to a rebel insurrection. News of the reopening pressured crude on Monday, Brent posting its biggest daily drop in a month.

Libya’s crude oil exports slid to 250 000 barrels daily, from 1.4 million a year ago, since militants took control of four eastern ports last year.

In Europe, the crisis in Ukraine is hardly deescalating. Kiev announced the start of an “anti-terrorist” operation in the separatist stronghold of Sloviansk earlier today. Meanwhile, Acting President Olexander Turchinov decreed the reinstatement of military conscription yesterday, in a bid to boost Ukraines standing forces. Earlier Moscow assured it has not intention of invading, but NATO and Kiev reported that Russia still has 40 000 troops near the border.

Technical View

According to Binary Tribune’s analysis for today, in case West Texas Intermediate June future breaches the first resistance level at $99.96, it probably will continue up to test $100.50. Should the second key resistance be broken, the US benchmark will most likely attempt to advance to $101.11.

If the contract manages to breach the first key support at $98.81, it will probably continue to drop and test $98.20. With this second key support broken, the movement to the downside will probably continue to $97.66.

Meanwhile, Brent will see its first resistance level at $108.30. If breached, it will probably rise and probe $108.85. In case the second key resistance is broken, the European crude benchmark will probably attempt to advance to $109.57.

If Brent manages to penetrate the first key support at $107.03, it will likely continue down to test $106.31. With the second support broken, downside movement may extend to $105.76 per barrel.