Crude oil trading outlook: WTI and Brent futures headed for slight weekly gains

WTI and Brent futures were little changed during early trade in Europe today, as investors weigh OPEC supply outlook, after a Saudi official dispelled hopes of an intervention by the worlds top exporter. Meanwhile, a strong dollar pressured commodities across the board.

WTI futures for October delivery on the New York Mercantile Exchange traded at $93.02 per barrel at 7:02 GMT today, down 0.05% for the day, while prices had ranged from $92.87 to $93.17 per barrel. The US benchmark is headed for a ~0.7% weekly gain, despite losing 1.4% on Thursday.

Meanwhile on the ICE in London, November Brent stood at $97.67 per barrel, down 0.03%, daily prices between $97.49 and $97.77 per barrel. The contract’s premium to November WTI widened to $5.81. The European brand dropped 1.3% yesterday, reversing gains from earlier this week.

“The market appears to have formed a bit of a base,” Ric Spooner, a chief strategist at CMC Markets in Sydney, said for Bloomberg. “We may also be getting close to a level where the market is a little nervous about taking more risk premium out of oil prices. There’s not a lot in there now and that leaves the price vulnerable to any external shocks.”

Libya, OPECs smallest exporter, said its crude output declined amid fighting between rival militants, which left a key oilfield inoperable.

The news came as Saudi Arabia, OPECs top producer and exporter with daily shipments of ~7m barrels, confirmed a calm stance in the backdrop of lower-than-desired crude prices.

“Daily, weekly and even monthly [price] gyrations have little meaning and constitute a source of noise around a solid trend,” Prince Abdulaziz Bin Salman Bin Abdulaziz, Saudi Arabia’s deputy oil minister, said for the Saudi Press Agency. “Oil demand is expected to continue on its upward trend.”

There was a bit of speculation that Saudi Arabia will cut output to keep prices in line with a $100 per barrel price, set as the benchmark for OPEC. Speculation was further fueled after the country said its production in August, before prices slumped the most, was 0.4m b/d lower. OPEC also lowered the projection of marketable oil by the cartel to 29.5m per day last week, down from the 30.0m/d set in June.

OPECs secretary general lent further support to oil bulls, saying the cartel will probably trim production plans to come in line with market demand.

US demand

The US Energy Information Administration (EIA) reported its weekly oil readings on Wednesday, revealing a significant increase in crude imports led to only the third positive net build in 16 weeks. Crude stocks had added 3.7 million barrels in the week through September 12th, with a 7% weekly increase of imports, while gasoline inventories were down 1.6m and distillates up 0.3m.

“With demand falling off, going into the [refinery maintenance] season, you will start to see stocks build in the US,” Michael Loewen, analyst at TD Securities, said for The Wall Street Journal. “Its going to weigh on the prices.”

On a broader scale, the US economy logged mixed data this week. Jobless claims were at a six-year low, while CPI readings disappointed and fell off the Fed target figures, just as the Federal Open Market Committee (FOMC) was deciding on monetary policy.

The monetary-policy body of the Fed decided to, as expected, cut monthly assets purchases by another $10bn and keep the benchmark interest rate at 0.25%. The Fed’s projection for next year was changed, however, with still a “considerable time” between the QE program closing and rates rising. The end-year rate target, however, was raised to 1.375% from the previous of 1.125%, offering dollar bulls significant support.

The US Dollar Index, which measures the strength of the greenback, reached a 4-year peak this week, weighing on all dollar-denominated commodities, such as oil.

“With the macroeconomics still remaining relatively soft, we still believe that crude oil prices should come under pressure,” Jonathan Barratt, chief investment officer at Ayers Alliance in Sydney, said for Reuters.

Technical support and resistance levels

According to Binary Tribune’s daily analysis for Monday, West Texas Intermediate October futures’ central pivot point is at $93.58. In case the contract breaches the first resistance level at $94.31, it will probably continue up to test $95.55. Should the second key resistance be broken, the US benchmark will most likely attempt to advance to $96.28.

If the contract manages to breach the first key support at $92.34, it will probably continue to drop and test $91.61. With this second key support broken, movement to the downside will probably continue to $90.37.

Meanwhile, November Brent’s central pivot point is projected at $98.09. The contract will see its first resistance level at $98.75. If breached, it will probably rise and test $99.81. In case the second key resistance is broken, the European crude benchmark will probably attempt to advance to $100.47.

If Brent manages to penetrate the first key support at $97.03, it will likely continue down to test $96.37. With the second support broken, downside movement may extend to $95.31 per barrel.