Crude oil trading outlook: futures ease ahead of inventory data

West Texas Intermediate and Brent crude fell in thin trading on Wednesday as several Asian countries entered week-long holidays, with analysts eyeing key housing and inflation data from the US ahead of a private inventory report.

US crude for delivery in April traded 0.33% lower at $54.11 per barrel at 7:53 GMT, having shifted between $54.22 and $53.83 during the day. The contract rose 1.16% the prior session to $54.29.

Meanwhile on the ICE, Brent for settlement in the same month slid 0.34% to $62.32 a barrel, holding in a daily range of $62.46-$62.08. The European crude benchmark gained 1.84% the previous session to settle at $62.53 with a premium of $8.24 to its US counterpart. The gap was at $8.21 on Wednesday.

Oil prices eased on Wednesday largely as a response to the previous sessions sharp gains, with WTI having gained 8.8% since Thursday. The Energy Information Administration is expected to report on Thursday, a day later than usual due to Mondays Presidents Day holiday, that US crude oil inventories rose by another 3.05 million barrels in the week ended February 13th.

If confirmed, this would post a new record for the last at least 80 years. Industry group the American Petroleum Institute will release its separate private data later on Wednesday.

ANZ bank said that US crude inventories are expected to increase further in the near term as outages at US refineries drive crude demand down.

The Energy Information Administration reported last Wednesday that US crude output surged 49 000 barrels per day to 9.226 million bpd in the week ended February 6th, the highest for weekly statistics dating back to January 1983, while inventories rose to 417.9 million barrels, the highest level for this time of the year in more than 80 years. Supplies at the Cushing, Oklahoma storage hub, were at the highest in a year.

The government agency also kept its 2015 and 2016 domestic crude output outlook mostly unchanged in February, projecting this year’s production pace to surge to 9.30 million bpd, the most since 1972.

Gains controversial

Falling US oil rig count, supportive OPEC comments and instability in the Middle East and Libya have helped bring prices higher, but many analysts saw the recent weeks rebound as excessive and likely to be reversed.

Drillers in the US idled 84 rigs last week, bringing the total count to 1 056, the fewest since August 2011. Their number has fallen by 519, or 33%, over the past ten weeks.

However, Goldman Sachs said on Monday that the 10-week long drop in US rig counts won’t suffice to halt output growth and that lower prices may be needed to balance the market as US production could still surge by 600 000 bpd in the fourth quarter from a year earlier.

Meanwhile, the IEA warned that the rise of the Islamic State in Iraq and Syria may significantly impede investment in the Middle East necessary to avoid a supply deficit in the next decade.

Continuing clashes in Libya have curbed nationwide output to a fraction of total capacity, with the state-run National Oil Corporation warning it would halt Libya’s entire output, if authorities fail to bring under control a wave of attacks on oil infrastructure.

“In Libya, the sabotage of a key pipeline linking the Sarir field with the eastern port of Marsa al-Hariga resulted in the shut-in of Sarir, which had been producing around 185,000 b/d, leaving the countrys output at below 150,000,” CNBC cited JBC Energy as saying.

In economic news, the Bank of Japan maintained unprecedented monetary stimulus in a push to bolster growth after the Japanese economy swung out of recession in the fourth quarter, but expansion fell well short of analysts expectations.

The central bank decided to keep its benchmark interest rate unchanged, and, as expected by analysts, to boost the monetary base at an annual pace of 80 trillion yen.

Market players now eyed developments in the US, with a pickup in the issuance of building permits expected for January, while housing starts probably fell last month and producer prices remained in the deflation zone for a third straight month. Minutes from FOMCs January 27-28 meeting are due to be released at 19:00 GMT.

Daily pivot points

According to Binary Tribune’s daily analysis, West Texas Intermediate April futures’ central pivot point is at $53.62. In case the contract breaches the first resistance level at $55.59, it may rise to $56.90. Should the second key resistance be broken, the US benchmark may attempt to advance $58.87.

If the contract manages to breach the first key support at $52.31, it might come to test $50.34. With this second support broken, movement to the downside could continue to $49.03.

Meanwhile, April’s central pivot point is projected at $61.93. The contract will see its first resistance level at $63.60. If breached, it may rise and test $64.66. In case the second key resistance is broken, the European crude benchmark may attempt to advance $66.33.

If Brent manages to penetrate the S1 level at $60.87, it could continue down to test $59.20. With the second support broken, downside movement may extend to $58.14 per barrel.