Crude oil trading outlook: futures steady ahead of US supply data, weaker dollar

Both West Texas Intermediate and Brent crude benchmarks held steady in early European trade on Tuesday ahead of US supply data tomorrow that is expected to show a drop in both gasoline and distillate fuel supplies. A weaker dollar allowed WTI to hold ground above $90 but abundant global supplies weighed on the entire complex.

US November crude slid 0.12% to $90.23 per barrel by 7:46 GMT, having ranged between $90.51 and $90.15 during the day. The American crude benchmark rose by 0.67% on Monday to close the day at $90.34 a barrel. The contract fell to a 1-1/2-year low of $88.18 on Thursday and settled last week 4% lower, reversing gains in the previous two five-day periods.

Meanwhile on the ICE, Brent for settlement in the same month fell by 0.14% to $92.66. Prices held in a daily range between $92.96 and $92.61 a barrel after closing 0.52% higher at $92.79 on Monday. The contract slid almost 5% last week, the most since April 2013, marking its fourth weekly decline in five. Brents premium to its US counterpart narrowed to $2.43 from Mondays close at $2.45.

Oil prices remained pressured after Saudi Arabia, the world’s top crude exporter, cut the list price of its crude to all destinations, rebutting broad market expectations for a reduction in its output, which would lift prices and accommodate smaller OPEC members at the cost of its own market share. Saudi Arabia is the only oil exporter with sufficient production with quick-shut capabilities, which makes possible significant, and timely, production cuts or increases, which could notably impact global prices.

The market, however, drew support by the dollars recent weakness. The US dollar index, which measures the greenbacks strength against a basket of six major trading partners, retreated from a four-year high hit on Friday. The December contract fell by 0.16% by 7:51 GMT to 85.910, having ranged between 86.195 and 85.760 during the day. The contract dropped 0.9% on Monday, the biggest one-day drop since January, to 86.044.

Ric Spooner, chief market analyst at Sydneys CMC Markets, said for CNBC: “The rally in oil prices on Monday was a short-term reaction to the fall in the dollar. The momentum has been downward. One of the key bits of news is Saudi Arabia cutting prices. This removes any near term potential for production cuts.”

Market players also eyed upcoming US supply data to gauge demand in the worlds top consumer. According to a Bloomberg survey of analysts ahead of EIAs weekly report, US crude oil inventories are expected to have risen by 2 million barrels in the seven days through October 3rd, while distillate fuel inventories probably dropped by 1.5 million barrels. Gasoline supplies are projected to have fallen for a fourth consecutive week, by 500 000 barrels.

Although the oil market, and particularly Brent, has shed most of its geopolitical premium, it still remained susceptible to geopolitical price spikes. Fighting between Kurdish defenders and IS militants continued for a third week in the town of Kobani, while NATO voiced its support to member Turkey, if it was to come under attack by IS insurgents in neighboring Syria.

Technical overview

According to Binary Tribune’s daily analysis, West Texas Intermediate November futures’ central pivot point is at $89.95. In case the contract breaches the first resistance level at $91.13, it will probably continue up to test $91.93. Should the second key resistance be broken, the US benchmark will most likely attempt to advance to $93.11.

If the contract manages to breach the first key support at $89.15, it will probably continue to drop and test $87.97. With this second key support broken, movement to the downside will probably continue to $87.17.

In weekly terms, the central pivot point is at $90.94. The three key resistance levels are as follows: R1 – $93.70, R2 – $97.66, R3 – $100.42. The three key support levels are: S1 – $86.98, S2 – $84.22, S3 – $80.26.

Meanwhile, November Brent’s central pivot point is projected at $92.42. The contract will see its first resistance level at $93.58. If breached, it will probably rise and test $94.38. In case the second key resistance is broken, the European crude benchmark will probably attempt to advance to $95.54.

If Brent manages to penetrate the first key support at $91.62, it will likely continue down to test $90.46. With the second support broken, downside movement may extend to $89.66 per barrel.

In weekly terms, the central pivot point is at $93.86. The three key resistance levels are as follows: R1 – $96.25, R2 – $100.18, R3 – $102.57. The three key support levels are: S1 – $89.93, S2 – $87.54, S3 – $83.61.