Crude oil trading outlook: WTI futures gain , while Brent drops as the US posts data, Iraq support

WTI futures were higher during early trade in Europe today, while Brent was lower. The US posted gains for US crude oil inventories yesterday, among other economic reports. Iraq continues to fuel fears over a supply disruption, supporting crude contracts.

West Texas Intermediate futures for settlement in August traded for $106.74 per barrel at 6:25 GMT on the New York Mercantile Exchange, up 0.23%. Prices ranged from $106.53 to $106.81 per barrel. The US contract added 0.44% yesterday, and so far this week WTI has lost about 0.3%.

Meanwhile on the ICE in London, Brent futures due in August stood for a 0.09% drop at $113.90 per barrel at 6:25 GMT. Daily high and low stood at $114.29 and $113.67 per barrel, respectively. Brent’s premium to August WTI stood at $7.16, after yesterdays closing margin of $7.50. The European contract dropped 0.40% yesterday, and so far this week Brent has lost 0.7%.

“Markets have already factored in the Iraq situation – unless something more chaotic happens. The threat of supply disruptions is receding,” Avtar Sandu, senior commodities manager at Singapores Phillip Futures, said for Reuters.

US oil report

The US Energy Information Administration (EIA) posted its weekly oil inventories report for the seven day through June 20 today. The log revealed a 1.742 million-barrel gain for commercial crude oil inventories, after the private American Petroleum Institute (API) had suggested a 4 million-barrel gain on Tuesday. A Bloomberg survey projected a 1.7 million-barrel draw. The previous reading, for the week through June 13, showed crude inventories had lost 0.6 million barrels.

Oil at Cushing, Oklahoma, the delivery point for the NYMEX contract and the largest hub in the US, was reported at 21.8 million barrels for a 0.4 million-barrel increase, after a gain of 200 000 was logged for the previous week. Meanwhile, hubs at the Gulf Coast added 2.0 million barrels, after 1.2 million were drawn last week. The report for the week through May 30 saw a further 6 million-barrel drop for hubs at the Gulf.

Domestic production of crude oil logged a minor drop for a reading of 8.446 million barrels per day (bpd), after minor growth was recorded in the report for the week ended June 13. Meanwhile, imports of crude were also little changed at 7.341 million bpd, after also gaining slightly last week. Inbound shipments of crude have declined by about 1.4 million bpd over the past month, almost 20% of current imports.

Gasoline inventories added 0.710 million barrels for the week through June 20, while the API had reported a 2.2 million-barrel increase, after last week saw 0.8 million barrels added. Distillate fuels stockpiles levels increased by 1.177 million barrels, while the API posted a 0.253 million-barrel drop on Tuesday. Previously, distillates inventories had added 0.4 million barrels in the week through June 13.

Refinery utilization rate was up by 1.4% for a standing of 88.5%, after an insignificant drop was logged in the previous report. Gasoline production this week decreased by almost 10%, or 0.8 million bpd for a standing of 9.054 million bpd, negating a similarly massive 0.9 million-bpd increase last week. Distillates output averaged 4.877 million bpd for a minor weekly increase, after an equally unimpressive decline was reported last week.

US economy

Several economic readings for the US, which consumes 21% of all oil, will be reported later today. Initial jobless claims for the week ended June 21 will be posted today, and analysts expect little change for a figure of 310 000. Meanwhile, continuing applications for unemployment benefits are projected to stand at 2.570 million, also only slightly more than previously.

Personal income and spending will also be reported today. Income for May has probably added 0.4%, after a further 0.3% gain for April. Meanwhile, personal spending is also set to have added 0.4% in May after -0.1% in April. Personal income and spending are leading indicators for consumer spending, which accounts for nearly 80% of US GDP.

Previously, the US posted some worse-than-expected data on Wednesday. Q1 GDP growth was far below the expected contraction of 1.8% at -2.9%, which is also the worst quarterly growth since Q1 of 2009. Durable goods orders for May also scored below par, though the negative sentiment was largely already priced. Also, Markit posted its preliminary reading on US services PMI for June, for a standing well above expectations at 61.2. A reading of 50 or higher means expansion, and vice versa. The greater the distance from 50, the more sizable an expansion or contraction.

The services sector accounts for about 80% of US GDP.

“There’s a broad theory that the recovery in the U.S. is gaining pace,” Michael McCarthy, a chief strategist at CMC Markets in Sydney, said for Bloomberg. “In the face of increasing supplies, prices have held firm and that suggests that the clear driver at the moment is geopolitical tensions.”

Iraq

Iraq did not see an easing of tensions yesterday. Prime Minister Nouri Maliki dismissed a widely discussed and promoted idea of a government of national unity, including more Sunni and Kurdish representation. Such calls represented a “coup against the constitution and an attempt to end the democratic experience”, he warned, the BBC reported.

Meanwhile, Kirkuk, an oilfield center, which was occupied by forces of the autonomous Kurdish government after the Iraqi military fled, saw the first episode of violence yesterday, as a car-bomb killed several and injured dozens. The Kurdish state is seen as a bulwark against the Sunni onslaught, and is yet to see major confrontations with its new ISIS-dominated neighbors in Iraq.

Previously, insurgents took control of the countrys largest oil refinery, which supplies about a third of Iraqs fuel demand. Elsewhere, militants seized all official border crossings in Syria and Jordan. The Jordanian army has been on full alert, protecting its borders against incursions, the Jordanian military said.

The Iraqi government insisted insurgents do not threaten Baghdad, nor the southern oilfields, which account for more than 75% of Iraqi oil output. Furthermore, the Iraqi oil minister said production and exports will actually increase over the next month.

Iraq is OPEC’s second-top oil producer, and exports some 3 million barrels per day from its main southern terminal at Basra.

Technical view

According to Binary Tribune’s daily analysis, in case the West Texas Intermediate August future on the NYMEX breaches the first resistance level at $107.51, it probably will continue up to test $108.52. Should the second key resistance be broken, the US benchmark will most likely attempt to advance to $109.54.

If the contract manages to breach the first key support at $105.48, it will probably continue to drop and test $104.46. With this second key support broken, the movement to the downside will probably continue to $103.45.

Meanwhile, August Brent on the ICE will see its first resistance level at $114.69. If breached, it will probably rise and probe $115.38. In case the second key resistance is broken, the European crude benchmark will probably attempt to advance to $116.11.

If Brent manages to penetrate the first key support at $113.27, it will likely continue down to test $112.54. With the second support broken, downside movement may extend to $111.85 per barrel.