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Crude oil trading outlook: WTI and Brent futures headed for weekly gains as Iraq, Ukraine crises support

WTI and Brent prices soared during early trade in Europe today, after the US announced it would conduct airstrikes on militants in Iraq. Meanwhile, Moscow introduced its own sanctions on Western trade, amid growing suspicions of an imminent Russian invasion in Ukraine.

WTI futures for settlement in September on the NYMEX traded at $98.12 per barrel at 8:02 GMT, up 0.80%. Prices were between $97.35 and $98.45 per barrel. The contract added 0.43% on Thursday to stand for a weekly loss of about 0.4%.

Meanwhile, September Brent on the ICE was at $106.53 per barrel, up 1.03%. Prices ranged from $105.61 to $106.85 per barrel. Brents premium to WTI was at $8.41, after Thursdays closing margin of $8.10. Brents September contract added 0.81% yesterday to stand for a weekly gain of about 0.6%.

“The dynamic has now shifted, and risks now go to the upside,” Michael McCarthy, chief strategist at CMC Markets in Sydney, said for Bloomberg today. “The forces that will be targeted are in the north of Iraq, well away from most of the oil production facilities, but sentiment can drive markets for significant periods of time.”

Iraq was again in the spotlights of oil markets, after US President Barack Obama announced the US will be carrying out air strikes on militants of the Islamic State (IS), should they threaten its personnel in autonomous Kurdistan in the north of the country. President Obama dismissed the possibility of sending in ground forces, saying he would not let the US be dragged in another war in Iraq.

Also, President Obama said the US would strike on the Islamists if they march on Baghdad, and if they maintain their blockade of Mount Sinjar, where tens of thousands of civilians fled to from the IS. In addition to military support, Mr Obama said the US would provide humanitarian air drops to the civilians, who were left without food, water or any sanitation. 40 children were already reported to have died in the mountain.

“We have the unique capabilities to help avert a massacre, [and] I believe the United States of America cannot turn a blind eye,” Obama said. “We can act, carefully and responsibly to prevent a potential act of genocide.”

The move comes as the international community was growing more concerned with the security of civilians in Iraq, with UN Secretary-General Ban Ki-moon saying he was “deeply appalled”, and Pope Francis urging the international community to do more to protect innocents.

“Its a catastrophe, a tragic situation: tens of thousands of terrified people are being displaced as we speak,” said Joseph Thomas, the Chaldean archbishop of the northern city of Kirkuk.

Iraq is OPECs second biggest oil exporter, with an output of about 3 million barrels daily. Most of it comes from the south of the country, widely seen as safe from militants. Some 200 000 barrels per day are produced in the north of the country, in autonomous Kurdistan, which is now in bitter fights with IS.

Russian counter-sanctions

Russia responded to Western sanction by introducing its own limitations to foreign trade on Thursday. Russian Prime Minister Dmitry Medvedev said Russia bans the import of meat, fish, dairy products, fruit and vegetables from the US, EU, Canada, Australia and Norway for a period of 1 year.

The counter-sanctions were ordered by Russian President Vladimir Putin on Wednesday and is a retaliation to the most-recent and toughest yet Western measures, which targeted the Russian sectors of the defense, energy, high-tech and finance.

The move comes as NATO warned of a possible Russian incursion in Ukraine, in light of fresh battle-ready troops massing near the border.

Nato chief Anders Fogh Rasmussen said Ukraines freedom and future were “under attack,” promising support against Russian “aggression”, the BBC reported. Russia “should not use peace-keeping as an excuse for war-making.”

Meanwhile fighting rages in eastern Ukraine, with heavy shelling reported in the rebel bastion of Donetsk, while a Ukrainian military aircraft was shot down. Several civilians were also reported killed.

Russia is the worlds leading energy exporter, and the souring of relations with the West has so far not affected natural gas and oil exports. Some analysts, however, are seeing a new Cold War in the making, and every rise in tensions worries investors.

China imports

China, the worlds second-top oil consumer, posted monthly foreign trade data today. Export surprisingly soared 14.5% on an annual basis in July, while imports dropped 1.6% from a year ago, also to the markets surprise. The countrys crude oil imports rose 2.1 percent in July from the previous month to 23.76 million tonnes, the data showed.

Previously, the US Department of Energy’s statistical arm, the Energy Information Administration (EIA) posted its weekly report on US oil inventories on Wednesday. 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. Gasoline stocks lost 4.4 million barrels, while distillate fuels, which include diesel and heating oil, were down 1.8 million barrels.

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 $97.20. In case the contract breaches the first resistance level at $97.86, it will probably continue up to test $98.37. Should the second key resistance be broken, the US benchmark will most likely attempt to advance to $99.03.

If the contract manages to breach the first key support at $96.69, it will probably continue to drop and test $96.03. With this second key support broken, movement to the downside will probably continue to $95.52.

Meanwhile, September Brent’s central pivot point on the ICE is projected at $105.17. The contract will see its first resistance level at $106.19. If breached, it will probably rise and test $106.93. In case the second key resistance is broken, the European crude benchmark will probably attempt to advance to $107.95.

If Brent manages to penetrate the first key support at $104.43, it will likely continue down to test $103.41. With the second support broken, downside movement may extend to $102.67 per barrel.

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