Crude oil trading outlook: futures gain with expected drop in US oil supplies, official data today; Ukraine, Libya support

Both West Texas Intermediate and Brent futures added on previous gains during early trading in Europe today, as US stockpiles at Cushing had reportedly shrunk in the week through May 9th. Kiev is holding talks today, in line with international accord, though no rebels nor Russian representatives will be present. Elsewhere, Libyas output remains below expectations, supporting Brent.

West Texas Intermediate futures for settlement in June traded for $101.99 per barrel at 6:52 GMT on the New York Mercantile Exchange, rising by 0.29%, daily prices between $101.83 and $102.15 per barrel, reaching a three-week high. Yesterday the contract added 1.10% as US gasoline stocks were said to have plummeted, despite a reported increase in crude oil inventories. On Monday the contract added a further 0.60%, after closing 0.24% higher last week.

Meanwhile on the ICE in London, Brent futures due in July recorded a 0.21% gain to trade for $108.77 per barrel at 6:53 GMT. Prices ranged from $108.63 to $108.83 per barrel, nearing a two-week high. Brent’s premium to WTI July contracts stood at $7.43, narrowing last sessions $7.49 closing margin. Yesterday the European benchmark added 0.70% as Ukraine and Libya supported, after a further 0.48% increase on Monday.

US oil stockpiles readings for the week ended May 9th were reported yesterday by the American Petroleum Institute (API). The private body said crude stocks had increased by 0.912 million barrels, while distillates gained 0.883 million barrels, and gasoline declined by 2.020 million barrels. The API also reported stockpiles at Cushing, Oklahoma, the delivery point for WTI, have decreased by 590 000 barrels.

Elsewhere, a Bloomberg survey suggested crude supplies remained unchanged, while gasoline inventories had increased by 300 000. A poll by Reuters proposed crude stockpiles decreased by 100 000 barrels. The official report is due later today.

“Falling Cushing stockpiles is having the biggest impact on rising crude prices at the moment,” said for Bloomberg Will Yun, commodities analyst at Hyundai Futures Co. in Seoul. “Ongoing tension in Ukraine is another factor that has been driving and supporting the upward streak in WTI prices.”

Ukraine

Kiev is to host a new round of peace talks today. However, no rebels will take part and Moscow has already dismissed the possibility taking part in talks, should the format not include separatist representatives. The effort comes in light of Germanys Foreign Minister Frank-Walter Steinmeiers visit to Ukraine, and is part of the Organisation for Security and Co-operation and Europes (OSCE) roadmap out of the crisis.

The conflict continues to rage on, as seven Ukrainian military personnel were killed in an ambush by rebels near the town of Kramatorsk in Donetsk region on Tuesday.

Donetsk and Luhansk regions declared independence, following the referendum on Sunday. Separatist leaders said all Ukrainian troops in the provinces will be regarded as “occupying” forces. The Kremlin said it expects the “will of the people be implemented,” though has yet to comment on the rebels requests for Moscow to incorporate the regions in the Russian Federation.

Elsewhere, Libya opened western oilfields and pipelines, after they were closed by protests. However, the output remains below expectations, boosting Brent, and the two major oil-loading ports in the country remain under rebel control. A breakthrough in negotiations could mean a long retreat for crude. As of yesterday, crude oil output in Libya is at 235 000 barrels per day, and the country has a potential of 4 million barrels daily.

Later this week reports on industrial production in the US and Eurozone are expected, in addition to CPI figures. The EU and US account for more than 30% of total oil consumption.

Technical view

According to Binary Tribune’s daily analysis, in case West Texas Intermediate June future breaches the first resistance level at $102.38, it probably will continue up to test $103.06. Should the second key resistance be broken, the US benchmark will most likely attempt to advance to $104.07.

If the contract manages to breach the first key support at $100.69, it will probably continue to drop and test $99.68. With this second key support broken, the movement to the downside will probably continue to $99.00.

Meanwhile, Brent will see its first resistance level at $109.05. If breached, it will probably rise and probe $109.55. In case the second key resistance is broken, the European crude benchmark will probably attempt to advance to $110.36.

If Brent manages to penetrate the first key support at $107.74, it will likely continue down to test $106.93. With the second support broken, downside movement may extend to $106.43 per barrel.