Crude oil trading outlook: futures cut overnight losses

Brent and West Texas Intermediate edged up on Wednesday, regaining a fraction of the recent losses to mark a second daily increase out of seven trading sessions.

January US crude gained 1.21% on Wednesday to $67.69 per barrel by 09:10 GMT. Prices held in a daily range between $67.97 and $66.99 a barrel. The contract settled 3.07% lower on Tuesday at $66.88, a day after it reached its lowest since July 2009, scoring its biggest one-day rally since August 2012.

Meanwhile on the ICE, Brent for delivery in the same month increased by 0.75% to $71.07 a barrel, having shifted in a daily range between $71.46 and $70.56. The European crude benchmark fell 2.76% yesterday to $70.54, settling at a premium of $3.66 to WTI. The gap narrowed to $3.38 on Wednesday.

Since OPEC decided not to provide any support for the falling prices, the unstable market has been struggling to find a price floor, with sharp movements in both directions.

Oil capped its fifth consecutive monthly loss, also the largest in six years, last Friday to hit a nearly 40% drop in the past five months in the longest streak of declines since the financial crisis in 2008.

Iraq stuck a deal with Kurdish officials to expand exports using delivery paths through Turkey. Safeen Dizayee, a spokesman for the Kurdish Regional Government, said that OPECs second-biggest producer will start shipments, up to a maximum of 550 000 barrels a day, from northern Iraq to the Mediterranean port of Ceyhan, utilizing a pipeline owned by the Kurds. According to BNP Paribas, the agreement will ensure that the global oil supply surplus will remain intact.

According to data provided by a Reuters survey, OPECs twelve-member joint production dropped by 340 000 barrels per day in November as Libyas output rebound was delayed. However, the absence of an intentional reduction of production by Saudi Arabia and others revealed the groups dedication to defend its market share.

However, former Saudi intelligence chief Prince Turki bin Faisal said that his country would be inclined to decrease output as long as other OPEC and non-OPEC producers, referring to Russia, would combine their efforts to support oil prices.

Traders relying on technical analysis warned that the period of declines is far from over and US crude may fall to $50 per barrel, should the price break a couple of support levels.

Crude reserves

Last week the EIA said that US crude supplies jumped by 1.946 million barrels to 383.0 million, exceeding analysts’ projections for a 250 000-barrel increase. Inventories at the Cushing, Oklahoma storage hub rose by 1.4 million barrels to 24.6 million.

Domestic crude production surged to 9.077 million barrels per day from 9.004 million last week, the highest on record for weekly data dating back to January 1983. Refineries operated at 91.5% of their operable capacity, compared to 91.2% during the week ended November 14th.

Total motor gasoline supplies gained 1.825 million barrels to 206.4 million, exceeding analysts’ projections for a jump of 1.817 million. Distillate fuel inventories, which include diesel and heating oil, fell by 1.648 million barrels to 113.1 million, topping forecasts for a 0.550-million increase.

According to Bloomberg, the government agency will report later today that crude inventories increased by 1.75 million barrels in the week ended November 28th.

Yesterday the American Petroleum Institute reported that weekly crude inventories dropped by 6.5 million barrels last week, while gasoline stockpiles lost 350 000 barrels and distillates reserves edged up by 2.5 million during the same period.

Pivot Points

According to Binary Tribune’s daily analysis, West Texas Intermediate January futures’ central pivot point is at $67.62. In case the contract breaches the first resistance level at $68.58, it may rise to $70.27. Should the second key resistance be broken, the US benchmark may attempt to advance $71.23.

If the contract manages to breach the first key support $65.93, it might come to test $64.97. With this second key support broken, movement to the downside could continue to $63.28.

Meanwhile, January Brent’s central pivot point is projected at $71.32. The contract will see its first resistance level at $72.25. If breached, it may rise and test $73.95. In case the second key resistance is broken, the European crude benchmark may attempt to advance $74.88.

If Brent manages to penetrate the first key support at $69.62, it could continue down to test $68.69. With the second support broken, downside movement may extend to $66.99 per barrel.