Crude oil futures trading outlook: WTI rises ahead of US supply data, Brent hovers near 14-month low

West Texas Intermediate crude rebounded off an 8-month low on Tuesday ahead of US supply data which is expected to show a drop in nationwide crude oil and refined petroleum products inventories. Brent also marked a minor advance but held near Mondays 14-month low after Iraqi and Kurdish forces retook a dam of strategic importance and as Libya boosted its crude output.

On the New York Mercantile Exchange, WTI crude for settlement in October traded at $94.20 per barrel at 06:57 GMT, up 0.48% on the day. Prices shifted in a daily range between $94.26 and $93.85 a barrel, close to Mondays 8-month low of $93.42. The contract slid 1.65% yesterday to end the session at $93.75.

Meanwhile on the ICE, Brent for delivery in the same month was up 0.26% to trade at $101.86 a barrel, having ranged between $101.91 and $101.55. The European crude benchmark fell to a 14-month low of $101.11 on Monday and closed the day 1.86% lower at $101.60. Brent traded at a premium of $7.66 to its US counterpart, down from Mondays settlement at $7.85 a barrel.

The US crude benchmark remained pressured to the downside by a stronger dollar but market consensus that the EIA will report tomorrow a drop in crude, distillate fuel and gasoline stockpiles allowed for a rebound from yesterdays multi-month low.

According to a weekly Bloomberg survey ahead of the government data, crude oil inventories are expected to have declined by 1.75 million barrels in the seven days through August 15th. Gasoline stockpiles are anticipated to have dropped by 1.7 million barrels while distillate fuel supplies, which include diesel and heating oil, probably slid by 300 000 barrels. The American Petroleum Institute will release its separate private report at 20:30 GMT today.

Michael McCarthy, a chief strategist at CMC Markets in Sydney, said for Bloomberg: “Given that market consensus is that we’ll see a draw in the data tomorrow, I’m not surprised to see oil bounce back. The rolling back of some of the geopolitical concerns is pressuring oil.”

Geopolitics

Easing geopolitical tension in some hot regions kept applying downward pressure on oil prices. Brent slid to almost a 14-month low on Monday after Kurdish and Iraqi forces retook the Mosul dam – Iraq’s largest, with the help of U.S. air support and now need to clear a 2-kilometer stretch of mines and bombs.

President Barack Obama said yesterday that US forces have carried out 35 air strikes which allowed for the recapturing of the Mosul dam and impaired the Islamic State (IS) offensive, and will continue limited air strikes against the rebels.

In the Gaza Strip, a ceasefire which came into effect on Wednesday and was due to expire on Monday was extended for another 24 hours following talks in Cairo, Palestinian and Israeli officials said. The death toll has reached more than 2 000 Palestinians and almost 70 Israelis since Israel began its attacks on Gaza on July 8th, officials said. Both sides had agreed to continue talks for a permanent deal.

Growing tension in Ukraine, however, provided some support. A convoy of civilians being escorted by the Ukrainian military from the towns of Khryaschuvate and Novosvitlivka was attacked by “terrorists” armed with guns from Russia on Monday, Ukrainian Col. Andriy Lysenko told CNN. Casualties included women and children.

The civilians were attempting to escape clashes between government forces and pro-Russian separatists but were not moving through an established humanitarian safety corridor when they came under fire in Ukraine’s Luhansk region.

Earlier, Ukraine reported it has destroyed a column of armored vehicles entering Ukraine from Russia, while another column of rocket launchers was also seen entering rebel-controlled territory from Russia.

The reports of heavy weaponry entering Ukraine comes as a Russian aid convoy was also poised to enter Ukraine through a rebel-controlled border crossing. Kiev has explicitly said that it would allow such aid only if the convoy passes into Ukraine through a government-controlled crossing. Russian authorities had said the convoy carried only humanitarian supplies and it was agreed with both Kiev and the International Committee of the Red Cross, but both denied to have agreed.

Some western countries suspect the convoy of transporting military supplies to the separatists, and have demanded an international inspection of the cargo before it enters Ukraine.

Technical support and resistance

According to Binary Tribune’s daily analysis, West Texas Intermediate October futures’ central pivot point is at $94.10. In case the contract breaches the first resistance level at $94.79, it will probably continue up to test $95.82. Should the second key resistance be broken, the US benchmark will most likely attempt to advance to $96.51.

If the contract manages to breach the first key support at $93.07, it will probably continue to drop and test $92.38. With this second key support broken, movement to the downside will probably continue to $91.35.

Meanwhile, October Brent’s central pivot point is projected at $102.00. The contract will see its first resistance level at $102.90. If breached, it will probably rise and test $104.19. In case the second key resistance is broken, the European crude benchmark will probably attempt to advance to $105.09.

If Brent manages to penetrate the first key support at $100.71, it will likely continue down to test $99.81. With the second support broken, downside movement may extend to $98.52 per barrel.