Brent futures in London added during early trading in Europe today, after a “successful” secession vote in Donetsk and Luhansk regions in Eastern Ukraine on Sunday pumped-up the risk premium. West Texas Intermediate in New York was steady after closing higher for the week on Friday. China, the US and EU are reporting important economic indicators this week.
West Texas Intermediate futures for delivery in June traded for $100.17 per barrel at 7:02 GMT on the New York Mercantile Exchange, adding 0.18%, daily prices between $99.93 and $100.24 per barrel. On Friday the US benchmark closed for a weekly gain of 0.24%, after a bullish report on US stockpiles.
Meanwhile on the ICE in London, Brent futures for settlement in June recorded a 0.28% gain to trade for $108.19 per barrel at 6:53 GMT, prices ranging from $107.94 to $108.36 per barrel. Brent’s premium to WTI stood at $8.02. The European brand closed for a weekly loss of 0.63% on Friday.
Separatists in Donetsk region in Eastern Ukraine have declared victory in the independence referendum, which took place on Sunday. They reported that 89% of voters backed self-rule, and said turnout was at 75%. Luhansk will post results later today, with expectations of a resounding victory there as well.
Organizers said that all government troops will be considered “occupying forces”. Furthermore, the separatists plan to hold another vote in a weeks time on whether to join the Russian Federation, much like the Crimea did earlier this year.
Ukraine and the West have condemned the vote. The EU is preparing an expansion of the list of sanctioned individuals and companies. Moscow is yet to comment on the results, after President Putin asked the rebels to postpone the referendum in light of violence and the nearing date for presidential elections in Ukraine, which he dubbed “a step in the right direction.”
Earlier, Russia celebrated 69 years since the victory over Nazi Germany on Friday. Russian President Vladimir Putin flew to the Crimea to attend the parade in Sevastopol. The move was widely condemned by the West and in Ukraine, calling it “regretful”, “inappropriate”, “provocative and unnecessary” and a “gross violation of Ukraine’s sovereignty”.
In Ukraine itself, separatists reported the deaths of two people in the town of Krasnoarmiisk, killed by government forces. Mariupol, a town in the Donetsk region, was the scene of heavy fighting on Friday, which left at 7 people dead, Ukraine’s Interior Minister Arsen Avakov reported.
“The market is concerned about disruption of crude from Russia,” said for Bloomberg Gordon Kwan, regional head of oil and gas research at Nomura Holdings Inc. in Hong Kong. “We don’t see any reason why oil prices will weaken significantly given the situation in Ukraine. All the focus is on the upside.”
China, Iran
Chinas government is not going to be implementing a large-scale stimulus program, Zhou Xiaochuan, Central Bank Chief, said on Saturday. China experienced the slowest rate of economic growth in 18 months for the first quarter of 2014, which prompted speculation of monetary easing.
Previously, a report on Friday revealed consumer prices in China had fallen short of expectations and registered a 0.3% deflation on a monthly basis, and 1.8% growth from a year ago. Producer prices fell 2.0% on an annual basis.
Tomorrow a report on industrial production for April in China is projected to show the sector has grown by 8.7-8.9% on an annual basis, in line with the figure from last year of 8.8%.
Iran is also in focus, as negotiations between Tehran and six world powers over the nuclear capabilities of the country will continue this week in Vienna, after they had given “useful” results last week. Sanctions limit Iran’s oil exports, and a possible breakthrough could result in a surge of fresh oil supplies in the markets, which would push down on prices.
Meanwhile, OPEC Secretary General Abdalla El-Badri said the group will maintain its current production rate at 30 million barrels daily in the near term.
US data
Tomorrow the private American Petroleum Institute will release its weekly report on oil inventories in the US. The report is seen as an indication for official data on Wednesday.
Last week commercial crude oil supplies stood at 397.6 million barrels, registering a decline of 1.781 million barrels. Motor gasoline supplies added 1.608 million barrels, while distillates inventories contracted by 0.447 million barrels.
US retail sales for April are also to be reported on Tuesday, and are forecast to have added 0.4%, down from an upward-revised 1.2% growth for March, while core retail sales are expected to show a 0.6% growth after 0.7% the previous month.
Later in the week reports on industrial activities in the EU for March, as well as Feds May manufacturing indices for New York and Philadelphia are expected. Also, CPI for April in the US will be revealed, which is a major indicator for the economy, which consumes about 21% of the world oil supply.
Technical view
According to Binary Tribune’s daily analysis, in case West Texas Intermediate June future breaches the first resistance level at $100.88, it probably will continue up to test $101.76. Should the second key resistance be broken, the US benchmark will most likely attempt to advance to $102.35.
If the contract manages to breach the first key support at $99.41, it will probably continue to drop and test $98.82. With this second key support broken, the movement to the downside will probably continue to $97.94.
Meanwhile, Brent will see its first resistance level at $108.77. If breached, it will probably rise and probe $109.56. In case the second key resistance is broken, the European crude benchmark will probably attempt to advance to $110.11.
If Brent manages to penetrate the first key support at $107.35, it will likely continue down to test $106.80. With the second support broken, downside movement may extend to $105.97 per barrel.
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