Crude oil trading outlook: futures draw support from Ukraine; US, China data

Crude oil futures gained on intensifying battles in Ukraine during early hours in Europe today, after being pressured by a bearish report on factory activity in China. Previously, data from the EU and US improved demand outlooks, supporting crude.

West Texas Intermediate futures for delivery in June traded for $100.37 per barrel at 8:12 GMT on the New York Mercantile Exchange, adding 0.61%, daily prices between $99.70 and $100.44 per barrel. The US crude benchmark had lost 1.84% on higher supplies in the US, before recovering 0.34% on Friday on positive data from the US.

Meanwhile on the ICE in London, Brent futures for settlement in June recorded a 0.21% gain to trade for $108.82 per barrel at 8:12 GMT, prices ranging from $108.40 to $108.92 per barrel. Brent’s premium to WTI stood at $8.45. The European brand added 0.77% on Friday with growing tensions in Ukraine and bullish data from the EU.

Released on Friday, US employment figures for April far exceeded forecasts to register readings unseen in years. The unemployment rate stood at 6.3% – the lowest since the very start of the financial crisis in Autumn 2008. Meanwhile, nonfarm payrolls added 288 000 for the month of April, stocking positive prospects for the US, which consumes 21% of the worlds total oil supply.

Previously, 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 barrel decrease, while distillates gains were at 1.936 million barrels, well-ahead of a projected 0.583 million barrel rise.

The final reports on April’s factory PMI in the Eurozone were also released on Friday. Germany recorded a slight slow-down in the pace of industrial activities to stand at 54.1, while Italy and France registered gains on the advance readings, to settle at 54.0 and 51.2, respectively. The Bloc as a whole also added to preliminary data, to log at 53.4.

China outlooks

HSBCs final reading for Aprils manufacturing PMI of China put the figure at 48.1, marking the fourth month in a row to register a contraction in factory activity. The reading is also behind the preliminary standing at 48.3, and below the governments 50.3 index, which also fell short of expectations.

“Oil is paring back on the back of these numbers and the trend may continue throughout the afternoon session in Asia,” said for Reuters Ben Le Brun, a market analyst with OptionsXpress in Sydney.

China accounts for 11% of the worlds oil consumption, and negative industrial outlooks pressure crude contracts. Not only were the demand prospects lowered, but traders began calculating the probability of an upcoming stimulus program by the government, which will increase the price of importing oil, further reducing its investment appeal.

Ukraine crisis

The conflict in Eastern Europe saw bloody developments last week. The so-called “anti-terrorist” operation, taking place around the pro-Russian stronghold of Sloviansk, saw intense fighting over the last several days. After a Ukrainian advance was halted and the government troops lost two helicopters, the militants wrestled back control of a number of suburbs. Now the rebel bastion is preparing for another battle, building barricades and rationing provisions.

Elsewhere in the country, the southwestern city of Odessa has witnessed severe unrest in the past few days. Opposing crowds battled on Friday in an event, which resulted in the deaths of dozens of pro-Russian sympathizers in a building fire. Yesterday a mob of several hundred assaulted the citys police headquarters and freed those detained for Fridays violence.

Acting Ukrainian Prime Minister Arseniy Yatsenyuk accused Russia of inciting the unrest: “Russias aim was to repeat in Odessa what is happening in the east of the country.” He went on to add, that Kiev had not lost control of the region, and that Russia is executing a a plan “to destroy Ukraine and its statehood,” the BBC reported.

Technical view

According to Binary Tribune’s analysis for today, in case West Texas Intermediate June future breaches the first resistance level at $100.21, it probably will continue up to test $100.66. Should the second key resistance be broken, the US benchmark will most likely attempt to advance to $101.18.

If the contract manages to breach the first key support at $99.24, it will probably continue to drop and test $98.72. With this second key support broken, the movement to the downside will probably continue to $98.27.

Meanwhile, Brent will see its first resistance level at $109.19. If breached, it will probably rise and probe $109.78. In case the second key resistance is broken, the European crude benchmark will probably attempt to advance to $110.58.

If Brent manages to penetrate the first key support at $107.80, it will likely continue down to test $107.00. With the second support broken, downside movement may extend to $106.41 per barrel.