Crude oil trading outlook: both WTI and Brent futures unchanged ahead of US oil report, economic data

Both WTI and Brent futures were leveled during early trade in Europe today. Yesterday crude oil was pressured by a preliminary report on US inventories, showing supplies increased. The official report is due later today. Contracts remained supported by strongly improving readings on the US economy, the worlds top oil consumer.

West Texas Intermediate futures for settlement in July traded for $102.78 per barrel at 6:51 GMT on the New York Mercantile Exchange, up 0.06%. Prices ranged from $102.76 to $103.11 per barrel. Yesterday the US benchmark lost 1.34%. So far this week the contract has fallen by 1.57%, though it did near a three-month peak at $104.50 per barrel.

Meanwhile on the ICE in London, Brent futures due in July recorded a 0.06% drop to trade for $109.74 per barrel at 6:41 GMT. Daily high and low stood at $110.00 and $109.72 per barrel, respectively. Brent’s premium to WTI stood at $6.96, largely on par with Wednesday’s closing margin of $7.09. Yesterday the European brand dropped 0.19%, and so far this week the contract has lost 0.66%.

“The U.S. benchmark fell more sharply than Brent overnight because it failed to breach key resistance at $105 a barrel,” said for Reuters Ken Hasegawa, commodity sales manager at Newedge Japan. “The contract may now slide further to below $100. Similarly, the European benchmark may slip to $107.”

US inventories

Yesterday the private American Petroleum Institute posted its readings on oil supplies in the US for the week through May 23. Crude oil stockpiles were logged to have gained 3.490 million barrels. Distillates were projected to have added 0.821 million barrels, while stockpiled gasoline had declined by 1.440 million barrels. The Institute also reported that inventories at Cushing, Oklahoma, had dropped by 1.51 million barrels and were pushing critical operational levels.

The official government report is due later today. According to a Bloomberg survey, crude inventories probably rose by 500 000 barrels, while a Reuters poll suggests an 700 000 barrel gain.

“The API report is supportive of higher prices, it’s the reason for the firm tone in trading today,” said for Bloomberg Michael McCarthy, chief strategist at CMC Markets in Sydney.

Last week crude supplies saw the biggest draw since January. The report for the week ended May 16revealed that crude oil stockpiled in the US had dropped by almost 8 million barrels. The decline was due, primarily, to a sharp decrease in imports, which fell by almost 0.7 million barrels per day (bpd). Oil at Cushing was also drawn to stand at 23.2 million barrels. Previously, commercial reserves of crude oil in the US were pushing record-high readings for the past two months, and they still remain in the vicinity of historic highs.

US economic reports

As the biggest consumer of oil in the world, accounting for more than 21% of total demand, the US economy is a dominating factor for consumption outlooks and price levels of petroleum products.

Later today the Bureau of Economic Analysis will report its revised figure on US Gross Domestic Product. GDP growth for the first quarter of 2014 will probably be downgraded from the 0.1% initial figure to -0.5% on a quarterly basis. The brutal winter withered economic activities, and a relatively negative reading was expected.

Elsewhere, initial applications for unemployment benefits are projected to stand at 318 000 for the week ended May 24, down from 326 000 for the previous reading, while continuing claims for the seven days through may 17 will probably be unchanged at 2.650 million.

Also today, agreed home sales, which only await payment, for the month of April will be revealed, and are forecast to have grown by 1.0% on a monthly basis, after adding 3.4% in March.

Tomorrow will also see some key US data. Personal income, which is a leading indicator for spending, for the month of April has probably increased by 0.3% on a monthly basis, after a further 0.5% in March. Personal spending, which in turn is a leading indicator for consumer inflation, is projected to have grown by 0.2% since March, after logging 0.9% for the previous month.

Also tomorrow, Chicagos PMI for May will be reported, with expectations of a contraction to a standing of 61.0, down from 63.0 for April. Michigans consumer sentiment for May has probably added to 82.5, after 81.8 for April.

Earlier this week, durable goods orders scored better than expected, while consumer confidence and services PMI were much better than previous readings, boosting sentiment for the worlds top oil-consuming economy.

Ukraine

Ukraines interim PM Arseniy Yatsenyuk called on Russia to stop aiding rebels, speaking in Germany.

“A number of trucks full of live ammunition, full of Russian-trained guerrillas crossed the Russian border into Ukraine,” he said. “We ask Russia and Putin to block the border to Ukraine. If Russia is out of this game we can handle this situation in a week.”

In response, Russian Foreign Minister Sergei Lavrov said Kievs actions would lead to “fratricidal” war.

Previously, Ukraine saw an escalation of fighting on Monday, as militants attacked the airport in Donetsk, and authorities soon retaliated, employing airstrikes and heavy weaponry. Possibly up to 100 separatist fighters had been killed. The mayor of Donetsk reported there have also been civilian casualties and urged the populace to stay indoors.

The attack came a day after the presidential election took place, with a clear winner in the first round. Former foreign minister and billionaire Petro Poroshenko received about 54% of the vote. Turnout was probably very poor, about 50%, with the separatist provinces of Luhansk and Donetsk boycotting the vote, and forcefully closing all voting stations.

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 $103.86, it probably will continue up to test $105.00. Should the second key resistance be broken, the US benchmark will most likely attempt to advance to $105.61.

If the contract manages to breach the first key support at $102.11, it will probably continue to drop and test $101.50. With this second key support broken, the movement to the downside will probably continue to $100.36.

Meanwhile, July Brent on the ICE will see its first resistance level at $110.34. If breached, it will probably rise and probe $110.86. In case the second key resistance is broken, the European crude benchmark will probably attempt to advance to $111.33.

If Brent manages to penetrate the first key support at $109.35, it will likely continue down to test $108.88. With the second support broken, downside movement may extend to $108.36 per barrel.