Crude oil trading outlook: futures edge up as US stockpiles fall

Brent and West Texas Intermediate both rose on Thursday, extending gains from yesterday, as US crude reserves slid last week, but upside momentum was limited amid OPEC inaction.

January US crude gained 0.76% on Thursday to $67.89 per barrel by 08:05 GMT. Prices held in a daily range between $68.22 and $67.28 a barrel. The contract settled 0.75% higher on Wednesday at $67.38, two days after it reached its lowest since July 2009 and scored its biggest one-day rally since August 2012.

Meanwhile on the ICE, Brent for delivery in the same month increased by 0.50% to $70.27 a barrel, having shifted in a daily range between $70.60 and $70.13. The European crude benchmark fell 0.88% yesterday to $69.92, settling at a premium of $2.54 to WTI. The gap narrowed to $2.38 on Wednesday.

Oil lost 18% last month in addition to the already low prices as OPEC decided to vote against a reduction in output and thus abstained from providing support for prices, which have since then experienced sharp movements in both directions amid an unstable market.

Iraq reached a deal with Kurdish authorities to increase exports through Turkey. Safeen Dizayee, a spokesman for the Kurdish Regional Government, said that OPEC’s 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.

However, according to a survey compiled by Bloomberg, Iraq may add around 300 000 barrels per day to its export shipments.

“Markets could be going through a temporary reprieve after “bearish exhaustion,” said Stephen Schork, editor of the Schork Report. “By most estimates, the economics on oil production are below breakeven.” Although Mr. Schork did not estimate how much oil prices could drop, he said that Brents resistance at $71.42 held a test, which may inspire selling attitude.

On the other side, US crude may fall to $50 per barrel, technical analysis traders warn, if the price breaks a couple of support levels.

Rex Tillerson, CEO of Exxon Mobil, said that the company had run tests on its profitability based on crude oil prices within the range of $40 and $120 per barrel, and he feels positive about the companys performance even in a low oil-price environment.

Crude Reserves

The Energy Information Administration reported on Wednesday that US crude oil inventories fell by 3.689 million barrels in the seven days through November 28th to 379.3 million, surpassing analysts’ expectations for a 1.75-million-barrel drop. Stockpiles at the Cushing, Oklahoma storage hub slid to 23.9 million barrels from 24.6 million a week earlier.

Refinery utilization picked up to 93.4% from 91.5% during the week through November 21st. Gasoline production decreased, while distillate fuel output increased, averaging 9.6 million and 5.0 million barrels per day, respectively.

However, this is as far as good news goes. US crude production jumped to 9.083 million barrels per day from 9.077 million, reaching the highest level on recorded weekly data dating back to January 1983. Imports slid to 7.303 million bpd, 170 000 bpd lower from a week earlier, while the four-week average of inbound shipments was 7.323 million bpd, 6.2% below year-ago levels.

Total motor gasoline inventories jumped by 2.143 million barrels to 208.6 million, exceeding analysts’ expectations for a 1.040-million jump. Distillate fuel stockpiles, which include diesel and heating oil, surged by 3.028 million barrels to 116.2 million, defying projections for a 180 000-barrel decline.

Pivot Points

According to Binary Tribune’s daily analysis, West Texas Intermediate January futures’ central pivot point is at $67.47. In case the contract breaches the first resistance level at $68.14, it may rise to $68.90. Should the second key resistance be broken, the US benchmark may attempt to advance $69.57.

If the contract manages to breach the first key support $66.71, it might come to test $66.04. With this second key support broken, movement to the downside could continue to $65.28.

Meanwhile, January Brent’s central pivot point is projected at $70.29. The contract will see its first resistance level at $71.09. If breached, it may rise and test $72.25. In case the second key resistance is broken, the European crude benchmark may attempt to advance $73.05.

If Brent manages to penetrate the first key support at $69.13, it could continue down to test $68.33. With the second support broken, downside movement may extend to $67.17 per barrel.