Crude oil trading outlook: WTI and Brent futures edge higher ahead of US oil report

WTI and Brent futures were slightly higher during early trade in Europe today, as investors eye the upcoming weekly report on US oil inventories. The conflict in Ukraine was still in focus, after Kiev captured 10 Russian soldiers on Ukrainian soil.

West Texas Intermediate futures for delivery in October traded at $93.92 per barrel, up 0.06%, at 6:53 GMT on the NYMEX. Prices ranged from $93.75 to $93.96 per barrel. The US benchmark added 0.5% yesterday.

Meanwhile, October Brent on the ICE in London, stood for a 0.24% increase at $102.75 per barrel. Daily low and high were $102.42 and $102.79 per barrel, respectively. The contract’s premium to its US counterpart narrowed to $8.83. The European brand dropped 0.1% on Tuesday.

“The market is just very lethargic … [and] will be looking for some new drivers and some clarity,” Andy Lebow, senior vice president of energy at Jefferies Bache LLC, said for The Wall Street Journal.

The key driver will be the official US Energy Information Administration (EIA) weekly oil inventories report, which is due later today and will cover the week through August 22. The American Petroleum Institute, an industry group, reported its readings on oil supplies, saying crude stocks 1.3 million-barrel drop for crude, a 3.2m decline in gasoline inventories and 2.4m increase for distillates.

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. Meanwhile, a Wall Street Journal poll projected a 0.9m drop for crude and 1m decrease for gasoline.

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

“The Energy Administration figures are a possible market mover,” Ric Spooner, a chief strategist at CMC Markets in Sydney, said for Bloomberg. “Geopolitical risk is back in play, simply because the market has stripped a lot of the premium out of pricing, making it vulnerable to any negative news.”

Ukraine

Ukrainian President Petro Poroshenko met with his Russian counterpart in Minsk, Belarus, as the push towards a ceasefire met support from both sides, and from the West.

The meeting took place the day after 10 Russian military servicemen were captured in Ukraine. Moscow said the group had entered Ukraine “by accident”, but the soldiers themselves said Russia should stop sending troops in Ukraine.

Kiev reported its army had won a skirmish with several dozen armored vehicles, which entered Ukraine from Russia, and were said to be manned by the Russian military disguised as Donbas rebels.

Russia is the world’s top energy exporter, and second-top oil exporter, and investors worried that shipments will be disrupted after Moscow started destabilizing Ukraine earlier this year 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, Libyan and Iraqi oil exports were unimpeded by the ongoing conflicts in the country, while Israel and Gaza officials were said to have agreed a long-term peace deal yesterday, calming fears for the worlds most violent region.

Technical support and resistance levels

According to Binary Tribune’s daily analysis, West Texas Intermediate October futures’ central pivot point is at $93.85. In case the contract breaches the first resistance level at $94.36, it will probably continue up to test $94.85. Should the second key resistance be broken, the US benchmark will most likely attempt to advance to $95.36.

If the contract manages to breach the first key support at $93.36, it will probably continue to drop and test $92.85. With this second key support broken, movement to the downside will probably continue to $92.36.

Meanwhile, October Brent’s central pivot point is projected at $102.75. The contract will see its first resistance level at $103.15. If breached, it will probably rise and test $103.80. In case the second key resistance is broken, the European crude benchmark will probably attempt to advance to $104.20.

If Brent manages to penetrate the first key support at $102.10, it will likely continue down to test $101.70. With the second support broken, downside movement may extend to $101.05 per barrel.