Crude oil trading outlook: WTI and Brent futures steady ahead of more economic reports, Ukraine talks

WTI and Brent futures were slightly higher during early trade in Europe today, as China reported mixed economic data. Previously, crude contracts dropped some on Monday, despite robust data from top-consumer US. Several more reports from top oil-consuming economies are due today and later in the week. Elsewhere, Ukraine will be in the focus of investors minds today, as a series of talks will be held, in regards to security matters in Eastern Europe.

West Texas Intermediate futures for settlement in July traded for $102.62 per barrel at 7:06 GMT on the New York Mercantile Exchange, up 0.15%. Prices ranged from $102.36 to $102.67 per barrel. Yesterday WTI closed for a 0.23% loss. Previously, On Friday the contract closed for a 1.57% weekly loss, after the weekly EIA report revealed climbing supplies in top-consumer US.

Meanwhile on the ICE in London, Brent futures due in July stood for a 0.08% gain at $108.92 per barrel at 6:56 GMT. Daily high and low stood at $108.98 and $108.80 per barrel, respectively. Brent’s premium to WTI stood at $6.30, largely on par with Mondays closing margin of $6.36. Yesterday the European brand closed for a 0.53% loss, after last week the contract dropped a further 1.02%.

Economic reports

Earlier today, HSBC and Markit reported their May reading on Chinese manufacturing for a PMI of 49.4, falling short of expectations and retreating from Aprils 49.7. Meanwhile, services PMI was logged at 55.5, improving on Aprils 54.8. Any reading below the boundary of “50″ means contraction in activities, and anything above it means expansion. The bigger the distance from 50, the greater the pace of expansion or contraction. HSBCs figure comes after the Chinese government reported an expansion in the sector on Sunday.

The Chinese industrial sector accounts for more than 45% of the economy, which consumes 11% of all oil in the world, while the services represent 44%.

Several more reports from top oil-consuming economies are due today. The EU, which accounts for 14% of total oil consumption, is expected to reveal unemployment rate for April in the Bloc remained at 11.8%. The preliminary figure for May CPI in the Eurozone is forecast at an unchanged 0.7% on a yearly basis, while Core CPI probably dropped to 0.9% on an annual basis.

Also today, the US, which consume 21% of the worlds oil, will post factory orders for April. Analysts project a reading of 0.6% monthly growth, after 0.9% in March.

Later this week, on Wednesday the EU will report on May PMI and Q1 GDP, while the US will post services PMI and a nonfarm employment report. On Thursday, HSBC will post services PMI for China, while the EU will reveal retail sales and a crucial ECB interest rate decision. Friday will close the week with reports for industrial production in Germany, and key data on payrolls in the US.

Previously

Yesterday ISM reported quicker expansion of manufacturing activities in the US for May, in accordance with expectations. Previously, the institute had reported a weaker standing, but twice corrected its reading for a sizable increase in growth. Also on Monday, the EU too revealed factory PMI, which was slightly worse than expected, though growth was maintained at a stable rate.

Earlier, on Sunday China posted the official manufacturing PMI for May, beating forecasts for a reading of a slight expansion, in contrast with HSBCs figure.

Last week a number of reports on the US economy boosted sentiment, as durable goods orders, consumer sentiment and services PMI were all shown to stand much better than expected. However, a sizable gain for oil supplies in the States was reported, which pressured crude contracts lower for the week.

Ukraine

Later today, the foreign ministers of the member-states of the North Atlantic Treaty Organization (NATO) will discuss the lasting implications of the Russian intervention in the Crimea, and what NATOs response and stance should be. Officials had “frank talks” with Russian representative Alexander Grushko on Monday, which reaffirmed the Wests view of the “illegitimacy and illegality” of the annexation of the Crimea, according to alliance spokeswoman Oana Lungescu.

Mr Grushko said that Europe might be heading for another “Cold war and an arms race”, in address to speculation of NATO planning forces being deployed in Eastern and Central Europe.

Meanwhile, US President Barack Obama will start his four-day tour to Europe today, with a meeting in Warsaw, Poland, with security matters on the table, and Ukraine in the spotlight. Mr Obama will meet his newly-elected, and still not inaugurated, Ukrainian counterpart Petro Poroshenko. Mr Poroshenko collected 54% of the vote on May 25, for a win in the first round. However, turnout was only at about 50%, and the breakaway regions boycotted the election. Mr Poroshenko has vowed to bring peace, and to have the “anti-terrorist operation take hours, not months”.

In Ukraine itself, hundreds of armed rebels carried out a sustained attack on a military base on Monday, near the Russian-Ukrainian border in the region of Luhansk, Ukrainian news agency UNIAN reported. Border troops were injured, but have repelled the assault, while the pro-Russian rebels are said to have lost several fighters.

Elsewhere, the town of Luhansks city hall was bombed by the Ukrainian air force, killing a number of separatists, barricaded inside.

Last week Ukraine saw some of the fiercest fighting since the conflict began earlier this year. Yesterday rebels shot down a military helicopter, killing at least 12 Ukrainian soldiers, including a high-ranking general, who headed special-combat training for the newly created National Guard. On Monday, separatist fighters assaulted Donetsk airport, only to suffer more than 100 dead, according to the “Donetsk People’s Republic” press office.

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 $103.18, it probably will continue up to test $103.89. Should the second key resistance be broken, the US benchmark will most likely attempt to advance to $104.43.

If the contract manages to breach the first key support at $101.93, it will probably continue to drop and test $101.39. With this second key support broken, the movement to the downside will probably continue to $100.68.

Meanwhile, July Brent on the ICE will see its first resistance level at $109.59. If breached, it will probably rise and probe $110.36. In case the second key resistance is broken, the European crude benchmark will probably attempt to advance to $110.84.

If Brent manages to penetrate the first key support at $108.34, it will likely continue down to test $108.86. With the second support broken, downside movement may extend to $107.09 per barrel.