WTI and Brent futures were higher during early trade in Europe today. A Malaysian airliner crashed over Ukraine last night, disturbing markets amid fresh sanctions against Russia. Meanwhile, Israel began a ground offensive in Gaza, further boosting the risk premium.
West Texas Intermediate futures for settlement in August traded for $103.72 per barrel at 7:38 GMT on the New York Mercantile Exchange, up 0.51%. Prices ranged from $103.94 to $103.50 per barrel. The US contract added 1.97% yesterday, and is up some 2.3% this week.
Meanwhile on the ICE in London, Brent futures due in September stood for a 0.44% gain at $108.36 per barrel. Daily high and low stood at $108.62 and $108.08 per barrel, respectively. Brent’s premium to September WTI stood at $5.61, after last session’s closing margin of $5.69. The European contract gained 0.67% on Thursday, after limited net gains earlier in the week.
“We have potentially more ground to gain as the market moves to reestablish a risk premium,” Ric Spooner, chief strategist at CMC Markets in Sydney, said for Bloomberg. “Apart from an escalation in actual military conflict, the question is to what extent Europe will be drawn in with more sanctions, which might ultimately impede the flow of gas or oil.”
A Malaysian airliner, Boeing 777, carrying 298 people, crashed over rebel-controlled territory in eastern Ukraine last night, immediately spurring speculation that it was shot down. The plane was flying at cruise altitude of some 10 kilometers, and no distress signal was emitted.
“In order to bring down an airplane from an altitude of 10,000m, you need to have very serious weapons…. missiles,” Sergei Kovalyov, head of the Russian Air Traffic Controllers Union, said for the BBC. “Its either a mistake or a terrorist act.”
Ukrainian President Petro Poroshenko said it was an “act of terrorism”, while Foreign Minister Pavlo Klimkin told the BBC authorities had intercepted phone conversations that proved the plane was shot down by pro-Russian separatists.
Alexander Borodai, a separatist leader, accused the Ukrainian government of shooting the plane down, and Russian President Vladimir Putin dismissed any liability. “The country in whose airspace this happened bears responsibility for it,” he said.
Earlier, the Ukrainian military had said two of its own warplanes were shot down by the militants, one of which is said to have also been at relatively high altitude of 6-7 km. Authorities say the insurgents are now equipped with modern and powerful weaponry supplied by Russia.
The Kremlin has denied any involvement with the conflict and the separatists. During the Crimean crisis, Russian President also denied Moscows involvement, only to later admit that it was Russian soldiers who took over the peninsula.
The US and EU stepped up sanctions against Russia this week, as Moscow’s efforts to deescalate tensions in Ukraine are seen as insufficient. In addition to expanding the list of individuals, the US also targeted Gazprombank, the Russian gas giant’s bank, Rosneft and the Kalashnikov concern, limiting their access to US capital markets.
“The Russian leadership will see once again that its actions in Ukraine have consequences,” US President Obama said. “Ukrainians deserve to forge their own destiny”.
The EU also added that the European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD) would stop financing projects in Russia. The EIB alone has provided more than €1.6 billion for Russian ventures since 2003.
After 10 days of airstrikes and naval bombardment, the Israeli ground forces have begun moving into the Gaza strip, fighting Hamas militants.
“Following 10 days of Hamas attacks by land, air and sea, and after repeated rejections of offers to de-escalate the situation, the IDF [Israel Defense Forces] has initiated a ground operation within the Gaza Strip,” the military said in a statement.
Since fighting escalated on July 8, nearly 2 000 attacks by the Israeli military have been carried out in the Gaza strip, while Hamas militants have fired more than 1 380 missiles aimed at Israel.
Meanwhile, the UN says at least 1 370 homes have been destroyed in Gaza and more than 18,000 people displaced in recent hostilities, while most of those killed in Gaza have been civilians.
According to Binary Tribune’s daily analysis, in case the West Texas Intermediate August future on the NYMEX breaches the first resistance level at $104.30, it probably will continue up to test $105.42. Should the second key resistance be broken, the US benchmark will most likely attempt to advance to $106.93.
If the contract manages to breach the first key support at $101.67, it will probably continue to drop and test $100.16. With this second key support broken, the movement to the downside will probably continue to $99.04.
Meanwhile, September Brent on the ICE will see its first resistance level at $108.73. If breached, it will probably rise and probe $109.56. In case the second key resistance is broken, the European crude benchmark will probably attempt to advance to $110.53.
If Brent manages to penetrate the first key support at $106.93, it will likely continue down to test $105.96. With the second support broken, downside movement may extend to $105.13 per barrel.