Crude oil trading outlook: WTI and Brent futures steady ahead of the EIA report; US, China data

WTI and Brent futures were slightly higher during morning trade in Europe today, after recording some losses yesterday. The private American Petroleum Institute (API) released its weekly report on US oil inventories yesterday, to reveal sizable gains for crude stockpiles. Investors await the official report later today. Later in the week, several key indicators for top oil-consuming economies are due.

West Texas Intermediate futures for settlement in July traded for $104.48 per barrel at 6:22 GMT on the New York Mercantile Exchange, up 0.12%. Prices ranged from $104.25 to $104.50 per barrel. Yesterday the contract dropped 0.06%, though it reached a three-month high at $105.06 per barrel, after on Monday WTI closed for a 1.70% gain.

Meanwhile on the ICE in London, Brent futures due in July stood for a 0.22% gain at $109.75 per barrel at 6:22 GMT. Daily high and low stood at $109.79 and $109.44 per barrel, respectively. Brent’s premium to WTI stood at $5.27, largely on par with Tuesdays closing margin of $5.17. Yesterday the contract lost 0.43%, after on Monday the EU benchmark added 1.21%.

“Oil has been boosted by an improved growth outlook in the U.S., but it’s being contained by high supply as we start to work into the driving season,” Ric Spooner, chief strategist at CMC Markets in Sydney, said for Bloomberg. “The inventory figures tonight may tell the story on how the market will handle this.”

US outlook

The weekly API report, which collects data on a voluntary basis from suppliers and producers, posted a 1.5 million barrel gain for crude stockpiles. Distillate fuels and motor gasoline inventories were reported to have declined by, respectively, 0.298 million barrels and 0.441 million. The official Energy Information Administration (EIA) report will be released later today. A Bloomberg survey suggested a 2 million barrel gain, while a Reuters poll projected a 1.5 million increase.

Several reports on the US economy, which consumes 21% of all oil, will be posted later this week. Jobless claims will be posted on Thursday, with expectations of unchanged weekly figures at 310 000 new applications and 2.6 million continuing claims. Also on Thursday, retail sales are expected to post a preliminary 0.4% monthly growth for May, after muted 0.1% increase the previous month. Later, PPI for May will be revealed on Friday, and analysts project a 0.3% gain on a monthly basis and 1.9% year-on-year.

China

The Chinese government revealed a plan to help boost the economy yesterday. Authorities announced reserve requirements cutbacks for banks, which lend to farming companies and small-to-medium sized firms, in attempt to reverse the economic growth slowdown.

“China’s rate cut decision is another step towards supporting the domestic economy,” Ric Spooner, chief market analyst at CMC Markets in Sydney, said for Reuters.

A number of key gauges on the Chinese economy will be reported later this week. Chinese industrial production for May will be posted on Friday. Experts suggest a steady 8.8% growth year-on-year, after 8.7% in April. The industrial sector accounts for nearly half of Chinese GDP. Also due on Friday, reports on fixed assets investments and retail sales for May are expected to reveal steady annual growth for both.

Previously, Chinese foreign trade and CPI were reported. Surprisingly shrinking imports indicated lowering domestic consumption, while a sharp drop for inbound crude oil shipments only added to negative sentiment. CPI and PPI were reported better-than-expected, but still in the negative on an annual basis.

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 $104.95, it probably will continue up to test $105.54. Should the second key resistance be broken, the US benchmark will most likely attempt to advance to $106.03.

If the contract manages to breach the first key support at $103.87, it will probably continue to drop and test $103.38. With this second key support broken, the movement to the downside will probably continue to $102.79.

Meanwhile, July Brent on the ICE will see its first resistance level at $110.19. If breached, it will probably rise and probe $110.87. In case the second key resistance is broken, the European crude benchmark will probably attempt to advance to $111.41.

If Brent manages to penetrate the first key support at $108.97, it will likely continue down to test $108.43. With the second support broken, downside movement may extend to $107.75 per barrel.