Crude oil trading outlook: futures remain steady as Ukraine tensions offset bearish US supply data

West Texas Intermediate crude rose in early European trading hours on Thursday and Brent was steady, as the still present dangers over Ukraine beat a bearish report on US oil inventories and resumption of oil exports from Libyas Hariga port. Continuation of Feds stimulus program also provided support for the crude market.

WTI futures for settlement in May traded at $104.17 per barrel at 07:36 GMT on the New York Mercantile Exchange, up 0.40% for the day, extending the bullish trend to five-out-of-six days. Prices shifted between $104.28 and $103.77 per barrel. The contract was mostly unchanged on Wednesday, having risen by 0.01%.

Meanwhile on the ICE, Brent futures for June settlement stood at $109.67 per barrel, up 0.06%, after closing higher for the previous five days, climbing almost 2% this week. Prices ranged from $109.35 to $109.84. The European benchmarks premium to WTI for delivery in the same month stood at $6.31 to narrow yesterdays gap of $6.57 when it closed higher for a third day.

Escalating tensions in Ukraine proved to be a very strong bullish force for oil prices. Limited success of the governments anti-terrorist operation prompted questions of the time-frame and the end-result of the action, stirring fears of prolonged military confrontation and a possible Russian intervention.

Yesterday, reports of pro-Russian separatists claiming Ukrainian military personnel carriers startled markets, bumping prices to a mid-day high, though gains were soon pared by a bearish US supplies report.

Later today in Switzerland, Geneva hosts high-ranking representatives from Ukraine, Russia, the EU and US for four-way peace talks. However, fears abound that the meeting will not overcome political tensions to strike a peaceful resolution to the crisis, supporting oil prices.

Michael McCarthy, chief strategist at CMC Markets, Sydney, said for Bloomberg: ”The saber-rattling in Eastern Europe is playing part in the firmness of oil prices… Prices resilience in the face of the inventory build-up is remarkable”.

Yesterday US crude pared some of its gains after the Energy Information Administration reported that US crude oil supplies jumped by 10.0 million barrels to 394.1 million in the week ended April 11th, sharply exceeding the median estimate of analysts surveyed by Bloomberg for a moderate 1.75-million-barrel jump. This was the largest build up in more than ten years.

US crude imports surged to 8.3 million barrels per day, up by 959 000 barrels from the previous week. Over the last four weeks, crude oil imports averaged 7.5 million barrels per day, 3.9% below the same four-week period last year.

US crude production rose by 72 000 barrels per day to 8.3 million bpd, the highest since April 1988.

Inventories at Cushing, Oklahoma, the biggest US storage hub and delivery points for NYMEX-traded contracts, slid by 771 000 barrels to 26.8 million, the lowest level since October 2009.

Also yesterday, dollar levels fell and gave a boost to oil prices, as Fed Chairman Janet Yellen pledged continuing support for the US economy. Yellen suggested investors should pay close attention to inflation and employment rates as signals of Feds policy on stimulus.”This approach underscores the continuing commitment of the FOMC to maintain the appropriate degree of accommodation to support the recovery,” Yellen said.

In other news, Libya – Africas largest crude reserves holder, announced the long-awaited re-opening of oil-exporting port Hariga – one of four oil-exporting ports in the east of the country, that were seized by militants last year.

Mohamed Elharari, a spokesman at the state-run National Oil Corporation, said for Bloomberg Libya is producing 330 000 barrels of crude per day.

The tanker Aegean Dignity began loading at 11AM local time yesterday and should take no longer than 24 hours. The resumption of exports pushed on crude prices, though fears over the condition of the other claimed ports capped gains.

Technical view

According to Binary Tribune’s daily analysis, in case WTI May crude manages to breach the first resistance level at $104.79, it will probably continue up to test $105.83. In case the second key resistance is broken, the US benchmark will probably attempt to advance to $106.66.

If the contract manages to breach the first key support at $102.92, it will probably continue to slide and test $102.08. With this second key support broken, the movement to the downside will probably continue to $101.05.

Meanwhile, Brent will see its first resistance level at $110.31. If breached, it will probably rise and test $111.01. In case the second key resistance is broken, the European crude benchmark will probably attempt to advance to $111.67.

If Brent manages to penetrate the first key support at $108.95, it will likely continue down to test $108.30. With the second support broken, downside movement may extend to $107.59 per barrel.