Crude oil trading outlook: WTI and Brent futures lower after US inventories data

WTI and Brent prices were lower during early trade in Europe today. Both crude and products inventories in the US were shown to have been drawn last week, a report revealed on Wednesday, though the news failed to lift prices, as supplies are still seen as ample.

WTI for September delivery traded at $96.72 per barrel at 7:55 GMT on the NYMEX today, down 0.21%. Prices ranged from a seven-month low of $96.65 to $97.16 per barrel. The contract dropped 0.47% yesterday for a weekly loss of about 1%.

Meanwhile, September Brent on the ICE stood at $104.54 per barrel, down 0.05%. Daily low and high were $104.45 and $104.86 per barrel, respectively. Brents premium to WTI was at $7.82, after Wednesdays closing margin of $7.67. The European benchmark was little changed yesterday, and was down some 0.3% for the week.

“The general trend is definitely downwards,” Tariq Zahir, analyst at Tyche Capital Advisors in New York, said for Reuters. “Cushing stocks got to a point where they cant go down much further. If we continue to see a build, that could open the floodgates to even lower prices.”

US oil inventories

The US Department of Energy’s statistical arm, the Energy Information Administration (EIA) posted its weekly report on US oil inventories yesterday. The log covers the week through August 1, and revealed a 1.8 million-barrel draw for crude stockpiles, levels dropping to the lowest since late February.

Supplies at Cushing, Oklahoma, the largest storage hub in the US and the delivery point for the NYMEX contract, had logged minor gains to stand at 18.0 million barrels, after reaching a six-year low of 17.9m last week.

Gasoline stocks lost 4.4 million barrels, EIA reported. The stark drop comes at peak US driving season and compares to a 0.3m gain last week. Analysts surveyed by Bloomberg and the Wall Street Journal had suggested little change for gasoline stocks, while the industry group API reported a 3.6m draw.

“The magnitude of the [gasoline stocks] drop was certainly more than the market was anticipating,” Tim Evans, analyst at Citi Futures Perspective, said for the Wall Street Journal. “It does certainly look like demand has picked up.”

Meanwhile, distillate fuels, which include diesel and heating oil, were down 1.8 million barrels.

Crude oil production was unchanged at 8.4 million barrels per day (bpd). Meanwhile, refinery utilization rate slightly decreased to 92.4%, while gasoline production was slightly higher at 10m bpd. Distillates output was slightly lower at 4.8m bpd.

Ukraine

NATO supported remarks made by Radoslaw Sikorski, Polish Foreign Minister, saying that Russia has amassed more than 20 000 combat-ready troops near the border with Ukraine. Moscow claims there will be exercises taking place there, though it is widely seen as a show of force, coming at a time when the Ukrainian military score advances against the pro-Russian separatists.

Heavy fighting was reported in Donetsk, a rebel bastion, while earlier on Wednesday two civilians were reported killed in Luhansk, the other major separatist stronghold, the BBC reported.

Meanwhile, Russian President Vladimir Putin ordered the government to draft a list of US and EU food imports, valued at some $3 billion per year, to be curbed or outright banned. The move is a retaliation against intensifying sanctions by the West, which just last week limited exports to Russia in the fields of energy, defense, high-tech as well as limiting Russian banks access to Western capital markets.

“We are seeing a bit of disinterest on the crude side with respect to the Ukrainian conflict,” Mark Keenan, head of commodities research in Asia at Societe Generale, said for Reuters.

Technical support and resistance levels

According to Binary Tribune’s daily analysis, West Texas Intermediate September futures’ central pivot point on the NYMEX is at $97.25. In case the contract breaches the first resistance level at $97.80, it will probably continue up to test $98.69. Should the second key resistance be broken, the US benchmark will most likely attempt to advance to $99.24.

If the contract manages to breach the first key support at $96.36, it will probably continue to drop and test $95.81. With this second key support broken, movement to the downside will probably continue to $94.92.

Meanwhile, September Brent’s central pivot point on the ICE is projected at $104.86. The contract will see its first resistance level at $105.17. If breached, it will probably rise and test $105.76. In case the second key resistance is broken, the European crude benchmark will probably attempt to advance to $106.07.

If Brent manages to penetrate the first key support at $104.27, it will likely continue down to test $103.96. With the second support broken, downside movement may extend to $103.37 per barrel.