Crude oil trading outlook: futures fall on US supply data, OPEC expectations divided

West Texas Intermediate and Brent crude fell in early European trading on Wednesday after private supply data showed a larger-than-expected build in US crude oil inventories last week. Brent remained near the lowest in more than four years as Saudi Arabia boosted its crude exports in September, while resisting calls from smaller OPEC producers to cut output.

January US crude traded 0.79% lower at $74.05 per barrel at 7:49 GMT, having shifted in a daily range of $74.50-$74.03. The contract slid 1.35% to $74.64 on Tuesday.

Meanwhile on the ICE, Brent for settlement in the same month was down 0.34% at $78.20. The European crude benchmark fell 1.06% to $78.47 on Tuesday, settling at a premium of $3.83 to its US counterpart. The gap widened to $4.15 on Wednesday.

All eyes remained on OPECs response to the recent months price rout. An Ecuador official said that Ecuador and Venezuela will ask members of the Organization of the Petroleum Exporting Countries to cut excess supplies, but leading producer Saudi Arabia has signaled its unwillingness to pump less.

CNBC reported, citing diplomatic and market sources, that Saudi Arabian officials told recent private briefings that the kingdom could cope for some time with the current price level, or even lower.

However, evidence of the opposite were present. According to official data, Saudis boosted crude shipments in September by 59 000 barrels per day, but exports of oil products fell by 236 000 barrels.

According to Barclays analysts, the kingdom is probably trimming supplies as Libyas output recovers. The kingdom has already slashed its outbound shipments by around 1 million bpd from this years peak, coinciding with the beginning of the price slump, the bank said.

US supplies

A stronger dollar also weighed on the oil segment, but speculations on OPECs November 27 meeting outcome remained under the spotlight, likely to overshadow any in-line-with-expectations supply statistics from the US.

David Lennox, a resource analyst at Fat Prophets in Sydney, said for Bloomberg: “Without OPEC intervention, we could see another $10 to $11 lost from the price.” He added that there will be cuts to oversupply by the Saudis, but the groups collective target of 30 million barrels per day will be left unchanged.

Industry group the American Petroleum Institute unexpectedly reported on Tuesday that US crude oil inventories surprisingly rose by 3.7 million barrels per day in the week ended November 14th. Stockpiles at Cushing, Oklahoma, the biggest US storage hub and delivery point for NYMEX-traded contracts, jumped by 1.4 million barrels. Motor gasoline inventories rose by 0.519 million barrels, while distillate fuel stockpiles, which include diesel and heating oil, slid by 3.3 million.

APIs data, however, is deemed less popular than official statistics as they are based on voluntary information by operators of pipelines, refineries and bulk terminals, while the government requires reports be filed with the Energy Information Administration. The EIA is expected to report a drop in crude inventories of between 0.8 and and 1.5 million barrels.

Investors will also keep a close eye on the US production pace. Last weeks report showed that domestic crude output surged to 9.063 million barrels per day, 91 000 bpd more than during the previous week, which was the highest on record dating back to January 1983. Refinery utilization rate was at 90.1%, up from 88.4% a week earlier.

Market players also eyed minutes from FOMCs October 28-29 meeting, due to be released at 19:00 GMT, as well as key inflation and housing data from the US throughout the week, as well as a slew of preliminary manufacturing and services PMIs from major oil consumers.

Pivot points

According to Binary Tribune’s daily analysis, West Texas Intermediate January futures’ central pivot point is at $75.10. In case the contract breaches the first resistance level at $76.02, it may rise to $77.41. Should the second key resistance be broken, the US benchmark may attempt to advance $78.33.

If the contract manages to breach the first key support $73.71, it might come to test $72.79. With this second key support broken, movement to the downside could continue to $71.40.

Meanwhile, January Brent’s central pivot point is projected at $78.88. The contract will see its first resistance level at $79.54. If breached, it may rise and test $80.62. In case the second key resistance is broken, the European crude benchmark may attempt to advance $81.28.

If Brent manages to penetrate the first key support at $77.80, it could continue down to test $77.14. With the second support broken, downside movement may extend to $76.06 per barrel.