Crude oil trading outlook: futures add on reports of declining supplies in the US; government data ahead

West Texas Intermediate marked gains during early trading in Europe today, after a private research body suggested supplies in the US have fallen. Meanwhile, Brent also added, while traders await the official report on stockpiles later today. The conflict in Ukraine helped put a floor on prices, as battles were inconclusive and risks weighed.

West Texas Intermediate futures for delivery in June traded for $100.18 per barrel at 7:33 GMT on the New York Mercantile Exchange, adding 0.68%, daily prices between $100.30 and $99.78 per barrel. On Tuesday the US benchmark closed on-par with the previous close, adding only 0.02%, after a 0.28% loss on Monday.

Meanwhile on the ICE in London, Brent futures for settlement in June recorded a 0.24% gain to trade for $107.32 per barrel. On Monday the EU benchmark fell 0.80%, after the brand added 0.77% on Friday with growing tensions in Ukraine and bullish data from the EU.

Released late on Tuesday, unofficial data on oil supplies in the US stood sharply contrasting expectations for continuing growth in crude oil inventories. The private American Petroleum Institute reported a 1.8 million barrel drop in crude stockpiles for the week through May 2nd, while the median of a Bloomberg survey put the figure at 1.25 million in the positive direction. Other forecasts also suggest a significant gain in crude oil, before the official report by the Energy Information Administration later today, while gasoline is expected to have risen by only 0.017 million barrels.

“I think most traders will be waiting for the official numbers tonight, but its quite clear production is running well ahead of demand at the moment,” said for Reuters Michael McCarthy, chief strategist at CMC Markets in Sydney.

The oil market was also supported by positive economic data by the US. Exports for March registered the second-highest level on record, a report on Tuesday revealed, with automobiles and aircraft standing strong. Last week data on much-improving employment, consumer spending and factory activity facilitated confidence in the US, which consume 21% of the oil in the world.

Elsewhere, HSBC’s final reading for April’s 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 government’s 50.3 index, which also fell short of expectations.

China accounts for 11% of the world’s oil consumption, and negative industrial outlooks pressure crude contracts. Further still, traders began calculating the probability of an upcoming stimulus program by the government, which would increase the price of importing oil, further reducing its investment appeal.

Ukraine crisis

The conflict in Eastern Europe continues to support oil prices, as fears over a Russian intervention project into a higher risk premium. The Ukrainian governments so-called “anti-terrorist” operation, taking place around the pro-Russian stronghold of Sloviansk, resulted in a bloody battle. Kiev reported at least four government soldiers were killed and about 30 injured, and a helicopter downed. The authorities also reported the deaths of at least 30 rebels.

Previously, after a Ukrainian advance was halted and the government troops lost two helicopters and a number of soldiers, the militants wrestled back control of some of the city’s suburbs. The stronghold remains blockaded by the military.

Russian Foreign Minister Sergei Lavrov dismissed the possibility of further peace talks, if the format remained the same. He demanded the pro-Russian opposition have representatives, or else “…[Russia, Kiev and the West] would just go round in circles,” the BBC reported.

Meanwhile, US President Barack Obama and German Chancellor Angela Merkel agreed the date of May 25th as a trigger for more sanctions against Russia, should the Kremlin fail to revise its position.

Technical view

According to Binary Tribune’s analysis for today, in case West Texas Intermediate June future breaches the first resistance level at $100.17, it probably will continue up to test $100.85. Should the second key resistance be broken, the US benchmark will most likely attempt to advance to $101.27.

If the contract manages to breach the first key support at $99.07, it will probably continue to drop and test $98.65. With this second key support broken, the movement to the downside will probably continue to $97.97.