Crude oil trading outlook: both WTI and Brent futures decline after the vote in Ukraine, US economic data ahead

WTI and Brent futures traded lower during early hours in Europe today, with the US and UK in holiday, limiting activity. Ukraine held presidential elections on Sunday, and the winner is almost certain to be confectionery billionaire Petro Poroshenko. The vote was boycotted by the eastern breakaway regions, but Ukrainian and western officials were hopeful it would bring stability and peace. Elsewhere, a number of important economic figures in top-consumer US will be reported this week. Previously, both crude oil contracts added sizable gains, as a big drop in US supplies were reported last week.

West Texas Intermediate futures for settlement in July traded for $104.02 per barrel at 7:15 GMT on electronic trading on the New York Mercantile Exchange, down 0.32%. Prices ranged from $103.92 to $104.34 per barrel. Last week the contract gained 2.71%, after the Energy Information Administration in the US revealed supplies of crude had decreased by almost 8 million barrels.

Meanwhile on the ICE in London, Brent futures due in July recorded a 0.52% drop to trade for $109.96 per barrel at 7:05 GMT. Daily high and low stood at $110.55 and $109.75 per barrel, respectively. Brent’s premium to WTI stood at $5.94, narrowing last weeks closing margin of $6.19. On Friday, the European benchmark closed for a 0.71% weekly increase, reaching an 11-week peak.

Both the ICE and NYMEX are in holiday today, and contracts will be earmarked for settlement tomorrow, when regular sessions begin.

Ukraine election

Ukraine held the presidential vote on Sunday, May 25. With 40.09% of ballots counted, confectionery billionaire Petro Poroshenko receives 54.09%, according to RIA Novosti. The margin would be enough to claim victory in the first round.

In his first speech after voting had ended, he addressed the need for peace and stability. He pledged his efforts would be aimed at not only ending the conflict withing Ukraine, but also normalizing relations with Russia. He is viewed as a strongly pro-Western politician, but argues that peace in the region would be impossible without cooperation with Russia. He added that he will never recognize Russias annexation of the Crimea.

“My first decisive step will be aimed at ending the war, ending chaos, and bringing peace to a united and free Ukraine,” Mr Poroshenko said at a press conference in Kiev.

The US and UK expressed their support for the vote and its result, dubbing it an “important step forward” and a “decisive signal.” Moscow has yet to officially comment on the result, though previously Russian President Vladimir Putin said the Kremlin will “respect” the vote.

Oil outlook

Tomorrow will bring a number of important economic data for the US, which consumes 21% of all oil in the world. Foremost, durable goods orders for April are to be reported. Experts suggest total orders have decreased by 0.5% on a monthly basis after gaining 2.5% in March, while core orders, which exclude the more volatile transportation items, have gained 0.3% after a 2.1% growth in March.

Later on Tuesday, Markit will post its preliminary services PMI for May. Analysts forecast a slightly quicker expansion for the services sector, which accounts for almost 80% of US GDP, with a figure of 55.6, up from 55.0 for April.

Lastly, the Conference Board (CB) will reveal its consumer confidence index for May. It is a leading indicator for consumer spending, which generates about 70% of US GDP. Analysts predict the CB will report an improving consumer sentiment, logging the index at 83.0, up from 82.3 for April.

Wednesday will post data from the EU, before on Thursday the US reveals quarterly GDP growth. Analysts expect a slight contraction after the brutal winter halted economic activities for a prolonged period. Also on Thursday, pending home sales for April in the US will be reported, with forecasts of small gains.

On Friday, a report on personal income and spending for April in the world’s top economy will be released. Economists project a minor monthly increase in both.

Elsewhere, China will be trying to reduce its energy consumption, relative to GDP, a statement on the governments website revealed.

“China is trying to reduce energy consumption targets and that news might be considered as a negative factor for the oil market,” said for Bloomberg Ken Hasegawa, energy trading manager at Newedge Group in Tokyo.

Last week, the Energy Information Administration report, released on Wednesday, revealed that crude oil stockpiled in the US had dropped by almost 8 million barrels in the week ended May 16. The decline was due, primarily, to a sharp decrease in imports, which fell by almost 0.7 million barrels per day (bpd). Oil at Cushing was also drawn to stand at 23.2 million barrels. Previously, commercial reserves of crude oil in the US were pushing record-high readings for the past two months, and they still remain in the vicinity of historic highs.

Gasoline supplies added 0.970 million barrels, amid a 14 000 bpd decline in domestic production and a 120 000 bpd growth in imports. Distillates inventories grew by 3.4 million in light of increasing production and more imports.

“Although demand is going to pick up during the driving season, inventories are very high and supply capacities are very high so there shouldnt be too much pressure on markets,” said for Reuters Ric Spooner, chief analyst at CMC Markets 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 $104.69, it probably will continue up to test $105.02. Should the second key resistance be broken, the US benchmark will most likely attempt to advance to $105.55.

If the contract manages to breach the first key support at $103.83, it will probably continue to drop and test $103.30. With this second key support broken, the movement to the downside will probably continue to $102.97.

Meanwhile, July Brent on the ICE will see its first resistance level at $110.74. If breached, it will probably rise and probe $110.95. In case the second key resistance is broken, the European crude benchmark will probably attempt to advance to $111.19.

If Brent manages to penetrate the first key support at $110.29, it will likely continue down to test $110.05. With the second support broken, downside movement may extend to $109.84 per barrel.