Crude oil trading outlook: futures add on Ukraine, Libya ahead of reports on inventories in the US

Crude oil futures traded slightly higher during early European hours, as investors eye every negative development in Ukraine, ahead of the presidential election on May 25. Libya is also supportive for prices, as the confrontation there is also entering a bloody phase, with a civil war looming on the horizon. Elsewhere, US supplies forecasts are impacting contracts, ahead of reports later today and tomorrow.

West Texas Intermediate futures for settlement in July traded for $102.25 per barrel at 7:13 GMT on the New York Mercantile Exchange, adding 0.14%. Prices ranged from $102.00 to $102.35 per barrel. Yesterday the contract added 0.52%, reaching a monthly peak at $102.49 per barrel. Last week the US brand added more than 2% as driving season in the US draws nearer.

Meanwhile on the ICE in London, Brent futures due in July recorded a 0.15% rise to trade for $109.53 per barrel at 7:04 GMT. Daily high and low stood at $109.63 and $109.30 per barrel, respectively. Brent’s premium to WTI stood at $7.28, on par with Mondays closing margin of $7.26. Yesterday the contract lost 0.35%, though it did reach a monthly high of $110.33 per barrel. On Friday the European benchmark closed for a 2.30% weekly gain with support from Ukraine and higher gasoline demand in the US.

Ukraine, Libya

NATO and Ukraine said the orders by Russian President Vladimir Putin yesterday for the withdrawal of Russian troops from the border were not being carried out. Both US and European officials said no sign of movement was detected.

On Monday Mr Putins administration released a statement, announcing his orders for the withdrawal. It was the third such command recently, all failing to produce a confirmation by western officials.

Meanwhile, Ukrainian officials asked Moscow to put off air-force military drills planned for Wednesday through Sunday in districts bordering Ukraine. The exercises will possibly fuel the confrontation between pro-Russian separatists and authorities as the government prepares to hold a presidential election on Sunday, May 25.

Last week Kiev began talks with a wide array of political and civic leaders in an attempt to ease tensions in the run up to the vote this Sunday. The round table, however, did not have representatives of the armed rebels from the eastern regions of the country, putting in question the probability of a successful resolution.

Previously, the Ukrainian provinces of Luhansk and Donetsk proclaimed independence after a “successful” referendum on May 11. Separatists said they are aiming at incorporating the regions in the Russian Federation, much like the Crimea did earlier this year.

Elsewhere, Libya is also offering some support, as fighting in Africas largest oil reserves holder left several dead in the weekend. Demands of radical change made by powerful warlords indicated peace might be a long way off. Earlier protests and insurgencies had previously crippled the oil industry of the country. Libyas output was logged at 210 000 barrels daily as of Thursday, far below the 1.4 million bpd a year ago.

“Whatever happens in Libya at the moment shouldnt really matter, basically because things cant get much worse than they are,” said for Reuters Jonathan Barratt, chief executive of commodity research firm Barratt Bulletin in Sydney.

US Supplies

US oil supplies reports are also in investors focus, as the private American Petroleum Institute will release its reading on inventories for the week through May 16 later today, ahead of the government report on Wednesday.

A Bloomberg survey suggests commercial stockpiles were unchanged at 398.5 million barrels, while a Reuters poll projects a 1 million barrel increase for inventories to reach a new record-high standing.

Supplies at Cushing, Oklahoma, the delivery point for WTI, are speculated to have dropped again, offering some support for oil contracts.

“Falling Cushing stockpiles is giving a general upward push in oil, and if they continue to drop prices will be further supported,” said for Bloomberg Will Yun, commodities analyst at Hyundai Futures Co. in Seoul.

Last Wednesday, US crude oil supplies were reported to have grown for the week ended May 9th. Inventories added 0.947 million barrels to stand at 398.5 million. Meanwhile, gasoline stocks declined by 0.772 million barrels, despite a 6.4% increase in production, signaling driving season is due, and distillates also lost.

Crude oil in storage at Cushing, the delivery point for WTI, fell by another 0.6 million barrels to 23.4 million. Hubs at the Gulf Coast added 2.3 million to stand at 215.7 million barrels.

Technical view

According to Binary Tribune’s daily analysis, in case the West Texas Intermediate July future on the NYMEX breaches the first resistance level at $102.56, it probably will continue up to test $103.01. Should the second key resistance be broken, the US benchmark will most likely attempt to advance to $103.53.

If the contract manages to breach the first key support at $101.59, it will probably continue to drop and test $101.07. With this second key support broken, the movement to the downside will probably continue to $100.62.

Meanwhile, July Brent on the ICE will see its first resistance level at $110.03. If breached, it will probably rise and probe $110.70. In case the second key resistance is broken, the European crude benchmark will probably attempt to advance to $111.06.

If Brent manages to penetrate the first key support at $109.00, it will likely continue down to test $108.64. With the second support broken, downside movement may extend to $107.97 per barrel.