Crude oil trading outlook: futures extend decline after downbeat US jobless data

Both West Texas Intermediate and Brent crude benchmarks fell in early European trading on Monday after settling the previous week more than 2% lower as downbeat US employment data spurred demand fears. Rising Chinese exports and crude imports added some confidence after recent worse-than-expected economic numbers.

On the New York Mercantile Exchange, WTI crude for delivery in October fell by 0.04% to $93.25 per barrel by 7:06 GMT, having shifted in a daily range between $93.62 and $93.12. The American crude benchmark fell by 1.23% on Friday to settle the week 2.7% lower.

Meanwhile on the ICE, Brent for settlement in the same month lost 0.07% to trade at $100.75, having ranged between $101.00 and $100.53. The contract lost 0.99% on Friday to close at $100.82 a barrel, registering a 2.3% weekly loss. Brent’s premium to its US counterpart widened to $7.50 from Thursday’s settlement at $7.38.

Data by the Chinese customs administration showed on Monday that Chinas exports surged by an annualized 9.4% in August, compared to analysts projections for an 8% growth. Inbound shipments marked a 14.5% expansion in July.

Meanwhile, imports contracted by 2.4% after sliding 1.6% in July, reflecting lower domestic demand. The figure defied analysts estimates for a 1.7% growth. As a result, the nations trade surplus widened to a record $49.03 billion, rebutting forecasts to narrow to $40.00 billion from $47.30 billion in July.

The Asian nations crude imports rose by 6% to 25.19 million tons in August from 23.76 million in July. Inbound shipments of oil product gained 36% to 2.53 million tons, while exports of the same category rose by 18.2% to 2.73 million tons.

However, a much slower than expected rate of US job growth overshadowed the Chinese data. The US Department of Labor unexpectedly reported on Friday that the pace of job creation in August fell to the lowest since January, at 142 000, reflecting a pause in the labor market’s recent momentum. Analysts had projected a jump to between 225 000 and 230 000 from July’s upward-revised 212 000 jobs added.

Meanwhile, the US unemployment rate matched expectations and slid back to a 6-year low of 6.1%, the same as in June, after jumping back to 6.2% in July. The drop reflected a decline in unemployment among teenagers.

Ric Spooner, chief market analyst at Sydneys CMC Markets, said for CNBC: “Oil prices remain soft. Brent is down on Fridays close due to economic concerns about the payroll figures. Investors are wary of the numbers.”

Geopolitics

A truce between Ukraine and pro-Russian separatists remained largely intact, albeit fragile, eroding oils geopolitical risk premium. The Ukrainian government and pro-Russian rebels who met in Minsk on Friday signed a preliminary agreement to start a ceasefire and a 12-point roadmap, Ukrainian President Petro Poroshenko said.

A new round of shelling was reported on Sunday near the Donetsk airport in eastern Ukraine, spurring fears that the truce might be short-lived. The ceasefire was honored on Saturday but shelling in Mariupol overnight was followed by fighting near the Donetsk airport early Sunday. One women was reported to have been killed, while four other people were injured.

European diplomats approved the Union’s broadest measure of sanctions against Russia on Friday. Hours after the Ukraine-rebels accord was signed, EU ambassadors sketched the bloc’s second package of economic sanctions, which bar Russian state-owned energy and defense companies from raising capital in the EU. The new penalties are pending EU national governments approval, which should be granted on September 8th.

Meanwhile in Iraq, OPECs second-biggest producer, Iraqi government forces said they have secured control over a wide area around the strategic Haditha dam with the assistance of US air forces. IS insurgents have repeatedly attempted to seize the dam on the river Euphrates in the western province of Anbar.

Sheikh Ahmed Abu Risha said, cited by Reuters, referring to the US air strikes: “They were very accurate. There was no collateral damage. If Islamic State had gained control of the dam, many areas of Iraq would have been seriously threatened, even Baghdad.”

The fighting to fend off IS attacks in the province of Anbar marks a widening of US military intervention, which was previously contained within the northern parts of the country. President Barack Obama will announce the US strategy to prevail over IS on Wednesday.

Persisting tensions in Libya provided some ground to oil prices as clashes between rival groups in Benghazi and near Tripoli killed more than 15 people on Sunday, fueling fears that the recently achieved nationwide output of more than 700 000 bpd may be short-lived.

Technical support and resistance

According to Binary Tribune’s daily analysis for Monday, West Texas Intermediate October futures’ central pivot point is at $93.71. In case the contract breaches the first resistance level at $94.57, it will probably continue up to test $95.84. Should the second key resistance be broken, the US benchmark will most likely attempt to advance to $96.70.

If the contract manages to breach the first key support at $92.44, it will probably continue to drop and test $91.58. With this second key support broken, movement to the downside will probably continue to $90.31.

Meanwhile, October Brent’s central pivot point is projected at $101.20. The contract will see its first resistance level at $102.06. If breached, it will probably rise and test $103.29. In case the second key resistance is broken, the European crude benchmark will probably attempt to advance to $104.15.

If Brent manages to penetrate the first key support at $99.97, it will likely continue down to test $99.11. With the second support broken, downside movement may extend to $97.88 per barrel.