Crude oil trading outlook: futures steady as lack of Iran nuclear deal offsets US inventory jump

West Texas Intermediate and Brent crude rose on Wednesday, moving past bearish US supply data, and were little changed on Thursday as Iran reached no deal in talks over its nuclear program, removing fears of additional Iranian oil flooding the market.

US crude for delivery in April traded 0.21% higher at $51.64 per barrel at 8:06 GMT, shifting in a daily range of $51.90-$51.60. The contract rose 2% on Wednesday to $51.53, having touched an intra-day low of $49.60.

Meanwhile on the ICE, Brent for settlement in the same month was down 0.20% at $60.43 a barrel, ranging between $60.74 and $60.30 for the day. The European crude benchmark declined 0.8% yesterday to $60.55, settling at a premium of $9.02 to its US counterpart. The gap narrowed to $8.79 on Thursday.

Oil prices tumbled on Wednesday after the Energy Information Administration reported that US crude inventories rose more than twice as expected last week, while production reached a new multi-decade peak, only to reverse movement through the end of the trading session after Iran news broke out.

The EIA reported that US crude oil inventories jumped by 10.303 million barrels in the week ended February 27th to 444.4 million, the most in at least 80 years. Analysts had projected a jump of little over 4 million barrels. US crude oil output rose by 39 000 barrels per day to 9.324 million bpd, the highest since 1972, while refinery utilization rates slid to 86.6% from 87.4% the previous week.

However, Brent partially recovered and WTI settled the day higher after Irans ambassador to the International Atomic Energy Agency said that no deal had been reached with world powers on the duration of a possible final agreement on the Islamic Republics nuclear program. Investors had feared that a final accord, accompanied by lifting of sanctions against Iran, would pave the way for a rise in Iranian oil supply, which has been limited to 1 million bpd.

Also supporting the market from the supply side, Libyas state-run National Oil Corp. declared force majeure on 11 oilfields yesterday, with the countrys nationwide output already running at a fraction of total capacity at 400 000 bpd. Libya holds Africas biggest crude oil reserves.

Gains, however, were limited by a stronger dollar and as the largest oil worker strike in the US found no resolution. A gauge measuring the strength of the US dollar against a basket of six major currencies rose to the highest in more than 10 years, led by a slump in the euro amid disappointing economic data from the single-currency bloc. Market players now eyed todays interest rate decision by the ECB as it prepares to add monetary stimulus through government bonds.

In the US, the United Steelworkers Union will resume talks with Royal Dutch Shell, the lead negotiator representing oil companies including Exxon Mobil and Chevron, on Monday in Houston. The strike, which began on February 1st, has expanded to 12 refineries accounting for about 20% of total US capacity and has been joined by more than 6 500 workers.

The USW has already rejected seven contract offers by Shell. A prolonged walkout would further curb US crude oil demand, adding to seasonally lower consumption during the upcoming maintenance season, while draining stockpiles of refined products.

In economic news, Automatic Data Processing reported yesterday slower-than expected US job growth in February, although the pace of job creation remained above 200 000, while the US services sector expanded at a better-than-projected rate, separate reports by Markit Economics and the Institute for Supply Management indicated.

Private data provided by HSBC and Markit Economics showed on Wednesday that China’s services sector expanded at a faster pace in February compared to a month earlier, with the HSBC China Services PMI coming in at 52.0, compared to 51.8 in January.

The HSBC Composite Output Index rose to a five-month high of 51.8 from January’s 51.0, reflecting a further increase in Chinese business activity, although employers in the manufacturing sector cut staff fractionally, while job growth in services eased.

Market players now eyed todays initial jobless claims and policy decisions by the ECB and BoE, while the Eurozone reports fourth-quarter GDP growth on Friday and the US Department of Labor releases its February jobs report at 13:30 GMT.

Pivot points

According to Binary Tribune’s daily analysis, West Texas Intermediate April futures’ central pivot point is at $51.04. In case the contract breaches the first resistance level at $52.48, it may rise to $53.43. Should the second key resistance be broken, the US benchmark may attempt to advance $54.87.

If the contract manages to breach the first key support at $50.09, it might come to test $48.65. With this second support broken, movement to the downside could continue to $47.70.

Meanwhile, April Brent’s central pivot point is projected at $60.32. The contract will see its first resistance level at $61.17. If breached, it may rise and test $61.79. In case the second key resistance is broken, the European crude benchmark may attempt to advance $62.64.

If Brent manages to penetrate the S1 level at $59.70, it could continue down to test $58.85. With the second support broken, downside movement may extend to $58.23 per barrel.