Crude oil trading outlook: futures steady ahead of US supplies; Ukraine, China

Crude oil futures kept around the previous close during early trading in Europe today. Unofficial data on oil inventories in top-consumer US is expected today, ahead of the government report tomorrow. China reported sluggish growth in retail sales and industrial production, pressuring contracts. Ukraine is still in focus, as rebels request to join the constitution of the Russian Federation.

West Texas Intermediate futures for settlement in June traded for $100.50 per barrel at 7:26 GMT on the New York Mercantile Exchange, losing 0.09%, daily prices between $100.45 and $100.77 per barrel. Yesterday the contract added 0.60% on Ukraine, after on Friday the it closed for a weekly gain of 0.24%, boosted by lowering supplies in the US.

Meanwhile on the ICE in London, Brent futures due in July recorded a 0.11% decline to trade for $107.67 per barrel at 7:27 GMT, prices ranging from $107.60 to $107.92 per barrel. The European brand added 0.64% on Monday. Brent’s premium to WTI July contracts stood at $7.78, leveled with yesterdays closing margin of $7.85.

US data on oil supplies will be revealed today, as the private American Petroleum Institute will share its weekly report late in the day, ahead of official data on Wednesday. A Reuters poll suggests commercial crude oil reserves have remained unchanged for the week through May 9th, while a Bloomberg survey projects a 1 million barrel decline in inventories.

Last week the report showed stockpiles had eased off from all-time-high figures, though they still remain at very high levels at 397.6 million barrels.

Later today data on retail sales for April in the US will be reported. Sales are forecast to have increased by 0.4% for the month, down from an upward-revised 1.2% growth for March, while core retail sales are expected to show a 0.6% growth after 0.7% the previous month. Sales are a major indicator for the health of the worlds top economy, where 70% of the GDP is generated through consumer spending.

Ukraine support

Fears over a Russian intervention in Ukraine kept a floor under prices, as the eastern Ukrainian regions of Donetsk and Luhansk announced a sound victory in the independence vote on Sunday. Moscow said it wishes to see the “will of the people be implemented,” however it has not commented on the vote organizers remarks, who called for Russia to annex the regions, much like it did with Crimea earlier this year. Rebel leaders said they will hold a vote on joining the Russian Federation, the BBC reported.

The West and Ukraine have widely condemned the referendum, dismissing its legitimacy. The EU expanded the list of sanctioned individuals and companies by 15 names yesterday, including 2 Crimean energy firms and close allies of Russian President Vladimir Putin.

Ukraine is to hold much-awaited presidential elections on May 25th, which are expected to bring stability and reinstate legitimacy of the authorities. Last week Mr Putin signaled a turn in Kremlins course, after backing the vote, calling it a “step in the right direction.” However, Moscow has done little to visibly support the election, and pro-Russian rebels say they will boycott the vote.

China

China reported several major indicators earlier today. Industrial production for April marked a slowdown to stand at 8.7% annual growth, falling short of the 8.9% expected expansion and behind last months 8.8% annual growth. The slackening is in line with recent bearish data from the second-top oil consumer. Previously, reports on manufacturing activities registered contraction, and GDP for Q1 of 2014 was logged at the lowest level in 18 months.

Another major figure reported by China today was the reading on retail sales for the month of April, which also registered a slowdown. Consumer purchases have grown by 11.9% from a year before, down from a 12.2% annual increase in March. Previously, a report on consumer inflation for April showed prices had shrunk by 0.3% on a monthly basis, indicating sluggish demand.

Lastly, fixed asset investment for April had risen by 17.3% from a year before, behind the reading for March of 17.6% annual growth.

Negative findings recently fomented talks of a stimulus program by Chinese authorities. However, President Xi Jinping defused speculation over the weekend, as he said “the economy must adapt to a new normal… China is still in a significant period of opportunity… but must take timely countermeasures [to reduce potential negative effects],” he was quoted as saying, signalling limited actions are possible.

Elsewhere, Libya is opening western oilfields and pipelines, after being closed by protests. However, the two major oil-loading ports in the country remain under rebel control. Iran is also set for improving export outlooks, with high-level talks in Vienna today, aiming to negotiate a softening of sanctions.

Technical view

According to Binary Tribune’s daily analysis, in case West Texas Intermediate June future breaches the first resistance level at $100.81, it probably will continue up to test $100.91. Should the second key resistance be broken, the US benchmark will most likely attempt to advance to $101.07.

If the contract manages to breach the first key support at $100.55, it will probably continue to drop and test $100.39. With this second key support broken, the movement to the downside will probably continue to $100.29.

Meanwhile, Brent will see its first resistance level at $107.96. If breached, it will probably rise and probe $108.10. In case the second key resistance is broken, the European crude benchmark will probably attempt to advance to $102.28.

If Brent manages to penetrate the first key support at $107.64, it will likely continue down to test $107.46. With the second support broken, downside movement may extend to $107.32 per barrel.