Crude oil trading outlook: crude oil futures steady after drops on all-time-high US supplies yesterday

West Texas Intermediate contracts orbited the last close during early trading hours in Europe today, after yesterday news of record-high crude oil supplies in the US hit the brand to drop near a month-low. Brent was also pressured by the news, but support by a deepening conflict in Ukraine capped losses to much less than those for the US benchmark.

West Texas Intermediate futures for delivery in June traded for $99.64 per barrel at 7:17 GMT on the New York Mercantile Exchange, dropping 0.10%, daily prices between $99.56 and $99.78 per barrel. The session yesterday registered the lowest price in almost a month at $99.35 per barrel, on news of US inventories. On Tuesday the contract added 0.44% with growing tensions in Eastern Europe.

Meanwhile on the ICE in London, Brent futures for settlement in June also recorded a 0.10% loss to trade for $107.96 per barrel at 7:17 GMT, prices ranging from $107.88 to $108.12 per barrel. Brent’s premium to WTI stood at $8.32. Yesterday the contract lost 0.84%, closing for a 2-week low of $107.55, after adding 0.80% on Ukraine the previous day.

Yesterdays government report on US oil inventories for the week ended April 25th revealed stockpiles of crude oil were at the all-time-high of 399.4 million barrels, registering a growth of 1.698 million barrels, though falling short of expectations. Domestic production recorded insignificant drops and averaged 8.352 million barrels per day, while imports stood at 7.412 mbd, down from last week’s 7.729 million barrels daily.

Motor gasoline supplies have increased by 1.564 million barrels, thrashing expectations of a 0.6 million barrels decrease, while distillates gains were at 1.936 million barrels, well-ahead of a projected 0.583 million barrel rise. The increase in refined products comes in-line with higher than usual for the season refinery utilization rate, which stood at 91.0% for a second week. Gasoline production picked-up pace to settle at 8.693 million barrels per day, while distillates remain at 4.9 million barrels daily.

Crude in storage at Cushing, the delivery point for WTI, fell by 0.6 million barrels to 25.4 million barrels. Hubs at the Gulf Coast gained 5.7 million barrels to record at 215.3 million barrels, following the expected outflow from PADD2, where Cushing is located, to refineries on the coast.

Ukraine and Libya

The ever-growing threats over the crisis in Ukraine continue to offer sizable support for crude oil. Responding to fresh US and EU sanctions, Russian President Vladimir Putin said: “If this continues, we will of course have to think about how (foreign companies) work in the Russian Federation, including in key sectors of the Russian economy such as energy.” He added that Moscow had no intentions whatsoever to invade Ukraine, and denied there being any Russian personnel in the troubled state.

However, Acting Ukrainian President Olexander Turchinov said yesterday, that military forces were on full combat alert, as Russian troops are still amassed near the border. He also admitted the authorities were unable to quell the turmoil in the eastern regions, and that Kiev is now aiming to contain the discontent. “Our task is to stop the spread of the terrorist threat first of all in the Kharkiv and Odessa regions,” he said.

In Libya, the Zueitina oil-exporting port will begin loading its first tanker today, after being closed for nearly a year due to a rebel insurrection. News of the reopening of the terminal pressured crude on Monday, the European benchmark posting its biggest daily drop in a month.

Libya’s crude oil exports sank to 250 000 barrels daily, from 1.4 million a year ago, since militants took control of four eastern ports last year.

“The market continues watching for the potential disruptions from supplies particularly from Ukraine and Libya,” said for Reuters Ric Spooner, chief analyst at CMC Markets in Sydney. “Geopolitical risks persist in Libya despite the restart of two ports,” he added, “Its a very unstable situation and its very difficult to count on that supply.”

Technical view

According to Binary Tribune’s analysis for today, in case West Texas Intermediate June future breaches the first resistance level at $100.55, it probably will continue up to test $101.36. Should the second key resistance be broken, the US benchmark will most likely attempt to advance to $101.96.

If the contract manages to breach the first key support at $99.14, it will probably continue to drop and test $98.54. With this second key support broken, the movement to the downside will probably continue to $97.73.

Meanwhile, Brent will see its first resistance level at $108.73. If breached, it will probably rise and probe $109.39. In case the second key resistance is broken, the European crude benchmark will probably attempt to advance to $109.98.

If Brent manages to penetrate the first key support at $107.48, it will likely continue down to test $106.89. With the second support broken, downside movement may extend to $106.23 per barrel.