Crude oil trading outlook: futures swing on US rig count, Libyan output boost

West Texas Intermediate and Brent crude were little changed in early European trading on Monday as investors weighed an eleventh weekly drop in active US oil rigs against a recovery in Libyan output, while Oman announced plans to boost output to almost 1 million barrels per day.

US crude for delivery in April traded 0.12% lower at 7:54 GMT at $50.75 per barrel, having shifted in a daily range of $50.99-$50.21. The contract plunged 1.97% on Friday to settle the week 5.3% lower at $50.81, ending a three-week streak of gains.

Meanwhile on the ICE, Brent for settlement in the same month was down 0.08% at $60.17 a barrel, holding between $60.50 and $59.74 for the day. The European crude benchmark was almost unchanged on Friday, settling the week 2.1% lower at $60.22 a barrel. Brent traded at a premium of $9.42 to its US counterpart, compared to Fridays settlement at $9.41.

Oil prices fell by almost 50% in 2014 as US crude production rose to the highest in more than three decades, while OPEC signalled determination to protect its market share and reached a collective decision at a November 27th meeting not to cut output. The market found support after falling to the lowest in six years in January as US drillers idled more than a third of active oil rigs, pressured by lower prices.

Baker Hughes Inc. reported on Friday that the number of rigs targeting oil in the US fell by 37 to 1 019 last week, the lowest since July 2011, marking a 35% cut in eleven straight weeks.

However, analysts have signalled that this alone wont be enough to curb US production, with Goldman Sachs predicting a 440 000-bpd output growth in the US by the fourth quarter of 2015, compared to a year earlier. US drilling has slowed since the beginning of the year, the bank said, but the rate of drillers idling oil rigs was also slowing.

The Energy Information Administration reported on Thursday that US producers pumped 9.28 million barrels per day of crude in the seven days through February 13th, up by 54 000 bpd from a week earlier. This was the highest pace of production on records dating back to January 1983. US crude oil inventories surged by 7.716 million barrels to 425.6 million, the most in at least 80 years. Supplies at the Cushing, Oklahoma storage hub soared to 46.3 million barrels from 42.6 million a week ago, the highest in more than a year.

Meanwhile, Libyas state-run National Oil Corp. said that a pipeline carrying crude to to the Hariga port has been repaired and oilfields in the countrys East have resumed pumping. Libya, the holder of Africas biggest crude reserves, pumped only 300 000 bpd in January, according to data by Bloomberg, ranking it last by production in the Organization of the Petroleum Exporting Countries.

At the same time, Oman, the biggest Middle East producer outside OPEC, said it plans to boost production to 980 000 bpd this year as the market rout is over, an official at the Oil and Gas Ministry said.

In the US, the United Steelworkers union will resume negotiations with oil companies this week after initiating a strike on February 1st over a wage dispute that has led to walkouts at 12 refineries and 3 other facilities. The union has rejected seven contract offers by Royal Dutch Shell, the leading negotiator representing companies including Chevron Corp.

Chinese markets remain closed through Wednesday for the Lunar New Year holiday.

In economic news, investors eyed todays existing home sales in the US, which likely fell in January, adding to last weeks downbeat housing data, while a report by the Conference Board will probably show tomorrow that consumer confidence in the worlds top oil consumer dropped in February. Also due tomorrow are consumer and core consumer inflation in the Eurozone, while later in the day Fed Chair Janet Yellen testifies before the Senate Banking Committee.

Pivot points

According to Binary Tribune’s daily analysis, West Texas Intermediate April futures’ central pivot point is at $51.34. In case the contract breaches the first resistance level at $51.96, it may rise to $53.12. Should the second key resistance be broken, the US benchmark may attempt to advance $53.74.

If the contract manages to breach the first key support at $50.18, it might come to test $49.56. With this second support broken, movement to the downside could continue to $48.40.

Meanwhile, April’s central pivot point is projected at $60.40. The contract will see its first resistance level at $60.97. If breached, it may rise and test $61.73. In case the second key resistance is broken, the European crude benchmark may attempt to advance $62.30.

If Brent manages to penetrate the S1 level at $59.64, it could continue down to test $59.07. With the second support broken, downside movement may extend to $58.31 per barrel.