Crude oil trading outlook: WTI and Brent futures rise ahead of US inventories

WTI and Brent futures were higher during early trade in Europe today, as investors eye upcoming reports on US oil inventories. Tensions in Ukraine supported crude, as reports of fresh clashes involving Russian military pumped up the risk premium.

West Texas Intermediate futures for delivery in October traded at $93.68 per barrel, up 0.35%, at 7:32 GMT on the NYMEX. Prices ranged from $93.35 to $93.77 per barrel. The US benchmark dropped ~0.3% on Monday.

Meanwhile, October Brent on the ICE in London, stood for a 0.25% increase at $102.91 per barrel. Daily low and high were $102.65 and $102.97 per barrel, respectively. The contract’s premium to its US counterpart widened to $9.23. The European brand added ~0.3% yesterday.

“Theres not much room for prices to move lower,” Avtar Sandu, a senior commodities manager at Phillip Futures in Singapore, said for Reuters. “The market needs a new driver.”

Weekly readings on US oil inventories are due, with the private American Petroleum Institute (API) scheduled to report its figures later today, ahead of the official Energy Information Administration (EIA) report tomorrow.

A Bloomberg survey suggested crude stocks lost 1.8 million barrels in the week through August 22, while gasoline inventory levels dropped by 1.7 million.

Crude supplies reached a historic high in April and are still higher than average, with lackluster gasoline demand and booming crude shale production.

“Overall, the main theme in the market is we have ample supplies,” Gene McGillian, an analyst at wholesale brokerage Tradition Energy, said for the Wall Street Journal.

Rising tensions in Ukraine helped raise the risk premium for Brent on Monday, though the global benchmark is still hovering just above a thirteen-month low.

Ukraine, Middle East conflicts

Kiev reported a column of some 30 Russian armored vehicles entered its territory on Monday, engaging Ukrainian forces near the town of Mariupol, ahead of talks that would involve the Russian and Ukrainian presidents. Authorities said the military successfully repelled the attack, and reports emerged that they even managed to capture 10 Russian military servicemen.

Russian Foreign Minister Sergei Lavrov said there is plenty of “misinformation” coming from Kiev lately. He also said Moscow was planning to send another humanitarian convoy to the embattled zones, saying he has sent a note “informing” Kiev of Kremlins plans.

The first convoy caused international condemnation, Kiev dubbing it an “invasion”, as it entered rebel-held territory without permission from authorities in Kiev, who said it was used to help the separatists.

Russia is the worlds top energy exporter, and second-top oil exporter, and investors worried that shipments will be disrupted after Moscow started destabilizing Ukraine and the West responded with sanctions. Nothing has managed to curb exports so far, but some analysts see a new Cold War in the making.

Elsewhere, Iraqi oil continued flowing to export terminals as the country struggles to form a new government. The country pumped some 3 million barrels of crude daily, making it OPEC’s second-biggest exporter, as government forces and Kurdish Peshmerga continue battling the Islamic State, supported by US airstrikes.

Fighting has been contained to Iraq’s north, while the southern oilfields, which account for about 80% of Iraqi oil production, have been untouched by violence so far.

Meanwhile, Libya saw crude production rise to ~0.7 million barrels per day despite growing internal power struggles, which left devastation many dead in the capital, Tripoli, over the past several weeks.

“The region is in chaos but production continues to rise,” Robin Mills, the head of consulting at Manaar Energy Consulting and Project Management, said for Bloomberg. “Brent’s been pretty weak. Global demand is still sluggish.”

Technical support and resistance levels

According to Binary Tribune’s daily analysis, West Texas Intermediate October futures’ central pivot point is at $93.45. In case the contract breaches the first resistance level at $93.85, it will probably continue up to test $94.35. Should the second key resistance be broken, the US benchmark will most likely attempt to advance to $94.75.

If the contract manages to breach the first key support at $92.95, it will probably continue to drop and test $92.55. With this second key support broken, movement to the downside will probably continue to $92.05.

Meanwhile, October Brent’s central pivot point is projected at $102.37. The contract will see its first resistance level at $103.10. If breached, it will probably rise and test $103.54. In case the second key resistance is broken, the European crude benchmark will probably attempt to advance to $104.27.

If Brent manages to penetrate the first key support at $101.93, it will likely continue down to test $101.20. With the second support broken, downside movement may extend to $100.76 per barrel.