Crude oil trading outlook: Brent futures headed for sizable weekly gain on violence in Iraq, WTI steady

Both WTI and Brent futures were little changed during early trade in Europe today. Crude continued rising yesterday, with Brent reaching a new nine-month high, as fighting was reported at Iraqs biggest oil refinery.

West Texas Intermediate futures for settlement in August traded for $106.08 per barrel at 6:38 GMT on the New York Mercantile Exchange, up 0.03%. Prices ranged from $106.05 to $106.25 per barrel. The US contract added 0.44% yesterday, and so far this week has lost about 0.1%, near a nine-month high.

Meanwhile on the ICE in London, Brent futures due in August stood for a 0.06% drop at $114.99 per barrel at 6:39 GMT. Daily high and low stood at $115.11 and $114.79 per barrel, respectively. Brent’s premium to August WTI stood at the quite significant $8.91, after last session’s closing margin of $9.01. The European contract added 0.70% on Thursday, reaching a nine-month high at $115.71 per barrel, and so far this week has gained more than 2%.

“There appears to be a potential deterioration in the situation in Iraq,” Ric Spooner, chief strategist at CMC Markets in Sydney, said for Bloomberg today. “This is one of the more significant geopolitical risk events that’s impacted the oil market for some time.”

Iraq

Sunni militants, led by a group of extremists called ISIS (Islamic State in Iraq and the Levant), continued fighting security forces in many towns in the northern and western provinces of the country. Fighting was also reported at Iraq’s largest oil refinery at Baiji, which supplies 40% of Iraqi domestic fuel demand. Some 30 000 people, who work at the refinery had been evacuated earlier.

“The south of the country is not beyond the geographic reach of extremist groups seeking to undermine the government,” analysts at Barclays said in a note, cited by Bloomberg. “We believe that any significant uptick in unrest in the south, even if oil facilities were spared, would likely accelerate the exodus of foreign oil workers out the country.”

Authorities assured that the military were in control of the refinery, and that the militants were being pushed back. The government also insisted insurgents do not threaten Baghdad, nor the southern oilfields, which account for 90% of Iraqi oil output.

Iraq is OPEC’s second-top oil producer, and exports some 3 million barrels per day from its main southern terminal at Basra.

US outlook

The US posted several economic readings yesterday. Initial applications for unemployment benefits for the week ended June 14 were logged at 312 000, beating expectations and improving on the 317 000 for the previous week. Meanwhile, continuing claims for the week through June 7 were also better than expected at 2.561 million, which is the lowest reading since October 2007.

“The trend in initial claims is good,” Ryan Sweet, senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, said for Bloomberg before the report. “The job market continues to heal.”

Philadelphia Fed Manufacturing Index for June was also revealed on Thursday. The figure was logged at 17.8, beating expectations and improving on May’s 15.4 reading.

Previously, the US Energy Information Administration (EIA) posted its weekly oil inventories report for the seven day through June 13 yesterday. The log revealed a smaller-than-expected drop for crude supplies, which declined by 0.6 million barrels. Imports of crude had slightly increased after dropping 20% over the previous two weeks. Meanwhile, gasoline stockpiles grew, as the report logged a 10% increase in motors gasoline production.

Technical view

According to Binary Tribune’s daily analysis, in case the West Texas Intermediate August future on the NYMEX breaches the first resistance level at $106.59, it probably will continue up to test $107.13. Should the second key resistance be broken, the US benchmark will most likely attempt to advance to $107.87.

If the contract manages to breach the first key support at $105.31, it will probably continue to drop and test $104.57. With this second key support broken, the movement to the downside will probably continue to $104.03.

Meanwhile, August Brent on the ICE will see its first resistance level at $115.80. If breached, it will probably rise and probe $116.53. In case the second key resistance is broken, the European crude benchmark will probably attempt to advance to $117.36.

If Brent manages to penetrate the first key support at $114.24, it will likely continue down to test $113.41. With the second support broken, downside movement may extend to $112.68 per barrel.