Crude oil trading outlook: futures continue upwards ahead of official inventories data; Ukraine support

Crude oil futures added on gains since yesterday during early trading hours in Europe today. Tuesdays American Petroleum Institute report on oil inventories in the US suggested crude stocks had declined by more than 10 million barrels. The official government report is due later today. Elsewhere, Ukraine saw further confrontations on Tuesday, when the countrys richest man urged for peace and unity ahead of the presidential election on May 25.

West Texas Intermediate futures for settlement in July traded for $102.85 per barrel at 7:03 GMT on the New York Mercantile Exchange, gaining 0.51%. Prices ranged from $102.78 to $102.98 per barrel. Yesterday WTI added 0.52%, reaching a monthly peak of $103.01, and so far this week the contract has gained 0.77%.

Meanwhile on the ICE in London, Brent futures due in July recorded a 0.04% rise to trade for $109.73 per barrel at 6:51 GMT. Daily high and low stood at $109.95 and $109.70 per barrel, respectively. Brent’s premium to WTI stood at $6.88, narrowing Tuesdays closing margin of $7.36. Yesterday the European brand added 0.29%, though so far this week the contract has lost 0.06%, reaching a monthly peak on Monday at $110.33 per barrel.

The private American Petroleum Institute released its weekly report on oil inventories in the US for the week ended May 16. The log revealed 10 million barrel decrease in crude oil inventories, which would mean the biggest decline since December. The standing shocked markets, bumping crude contracts ahead of official data later today.

“The inventory figures will be important now, there are signs that refinery capacity is picking up as we move into the summer driving season,” said for Bloomberg Ric Spooner, chief strategist at CMC Markets in Sydney. “We’re heading into the time of the year where things start to become more positive for oil consumption.”

A Bloomberg survey suggests commercial stockpiles were unchanged at 398.5 million barrels, while a Reuters poll projects a 1 million barrel increase for inventories to reach a new record-high standing.

Supplies at Cushing, Oklahoma, the delivery point for WTI, are speculated to have dropped again, offering some support for oil contracts.

Last Wednesday, US crude oil supplies were reported to have grown for the week ended May 9th. Inventories added 0.947 million barrels to stand at 398.5 million. Meanwhile, gasoline stocks declined by 0.772 million barrels, despite a 6.4% increase in production, signaling driving season is due, and distillates also lost.

Crude oil in storage at Cushing, the delivery point for WTI, fell by another 0.6 million barrels to 23.4 million. Hubs at the Gulf Coast added 2.3 million to stand at 215.7 million barrels.

Ukraine, Libya

Hundreds of people attended staged rallies in Donetsk yesterday, after Ukraines richest man, Rinat Akhmetov, whose wealth is estimated at more than $11 billion, urged for a mass protest for peace. His Donbass Arena stadium hosted a crowd of several hundred chanting the Ukrainian hymn and waving the blue and yellow, in a peaceful unity demonstration.

The pro-Russian separatists threatened to nationalize Mr Akhmetovs assets. His enterprises are based in the Donetsk region, and the leader of the “Donetsk Peoples Republic”, one of the breakaway provinces, Denis Pushilin expressed disappointment in Mr Akhmetovs “choice of allegiance.”

“Akhmetov has made his choice. Unfortunately, he chose against the people of Donbass. Paying taxes to Kiev means financing terrorism in Donbass,” Mr Pushilin was quoted as saying, the BBC reported.

Yesterday, Ukrainian officials asked Moscow to put off air-force military drills planned for Wednesday through Sunday in districts bordering Ukraine. The exercises will possibly fuel the confrontation between pro-Russian separatists and authorities as the government prepares to hold a presidential election on Sunday, May 25.

Last week Kiev began talks with a wide array of political and civic leaders in an attempt to ease tensions in the run up to the vote this Sunday. The round table, however, did not have representatives of the armed rebels from the eastern regions of the country, putting in question the probability of a successful resolution.

Previously, the Ukrainian provinces of Luhansk and Donetsk proclaimed independence after a “successful” referendum on May 11. Separatists said they are aiming at incorporating the regions in the Russian Federation, much like the Crimea did earlier this year.

Elsewhere, Libya is also offering some support, as fighting in Africa’s largest oil reserves holder left several dead in the weekend.

The country will hold a general election on June 25, as authorities attempt to quell unrest.

However, demands of radical change made by powerful warlords indicated peace might be a long way off. Earlier protests and insurgencies had previously crippled the oil industry of the country. Libya’s output was logged at 210 000 barrels daily as of Thursday, far below the 1.4 million bpd a year ago.

“Whatever happens in Libya at the moment shouldn’t really matter, basically because things can’t get much worse than they are,” said for Reuters Jonathan Barratt, chief executive of commodity research firm Barratt Bulletin in Sydney.

Technical view

According to Binary Tribune’s daily analysis, in case the West Texas Intermediate July future on the NYMEX breaches the first resistance level at $103.00, it probably will continue up to test $103.66. Should the second key resistance be broken, the US benchmark will most likely attempt to advance to $104.22.

If the contract manages to breach the first key support at $101.68, it will probably continue to drop and test $101.02. With this second key support broken, the movement to the downside will probably continue to $100.36.

Meanwhile, July Brent on the ICE will see its first resistance level at $110.09. If breached, it will probably rise and probe $110.50. In case the second key resistance is broken, the European crude benchmark will probably attempt to advance to $111.00.

If Brent manages to penetrate the first key support at $109.19, it will likely continue down to test $108.70. With the second support broken, downside movement may extend to $108.29 per barrel.