Crude oil trading outlook: WTI and Brent futures ease off yearly highs ahead of US oil reports

WTI and Brent futures were lower during early trade in Europe today. Fighting in Iraq continued, with militants making more advances, but traders bet on the safety of the southern oilfields. Several reports on top oil-consuming economies are due today.

West Texas Intermediate futures for settlement in August traded for $105.91 per barrel at 6:34 GMT on the New York Mercantile Exchange, down 0.24%. Prices ranged from $105.25 to $106.08 per barrel. The US contract dropped 0.62% yesterday, after adding about 0.6% last week.

Meanwhile on the ICE in London, Brent futures due in August stood for a 0.06% drop at $114.05 per barrel at 6:35 GMT. Daily high and low stood at $114.12 and $113.62 per barrel, respectively. Brent’s premium to August WTI stood at $8.14, after Mondays closing margin of $7.95. The European contract declined by 0.60% yesterday, after adding more than 2% last week.

“The rise that we’ve seen recently is about building in a risk premium for a potential acceleration of the Iraq situation,” Michael McCarthy, chief strategist at CMC Markets in Sydney, said for Bloomberg. “We’re likely to see this jagged trading continue, where the oil price spikes on news and drifts back as we wait further developments.”

US reports

The private American Petroleum Institute (API) will post its weekly reading on US oil inventories for the seven days ended June 20 later today. The Institute predicted a 5.7 million-barrel draw for crude oil stockpiles last week, while the official Energy Information Administration (EIA) figures stood for a relatively small drop of 579 000 barrels.

This weeks EIA report is due tomorrow, and analysts predict a 1.333 million barrel-decline for crude, while gasoline probably added 1.833 million barrels and distillate fuels gained 1 million.

Previously, key economic reports were released yesterday. The Eurozone, which accounts for 14% of total oil consumption, reported preliminary services and manufacturing PMI for June, with Germany, France and the Bloc as a whole scoring worse than expected. HSBC revealed a surprisingly improving factory sector in China for June, while the US revealed existing home sales improved in May.

Consumer confidence in the Eurozone and in the US will be reported today. The German Ifo institute will probably reveal steady sentiment for the EU for July, with expectations for a standing of 110.2, after 110.4 in June. Meanwhile, the Conference Board is set to unveil growing confidence in the US for July, with a forecast reading of 83.5, after 83.0 in June.

Later today, the US will also post new home sales. Analysts suggest an annualized rate of 440 000 in May, for a slight increase to Aprils 433 000. The real estate sector accounts for about 13% of US GDP.

Iraq

Sunni militants, led by a group of extremists called ISIS (Islamic State in Iraq and the Levant), continued advancing throughout Iraq. Tribal fighters loyal to the Islamists captured Baiji refinery, Iraqs foremost source of refined fuels, supplying about a third of the countrys fuel. A tribal spokesman said his tribe had “fully captured” the refinery, and that the advance towards Baghdad would continue, the BBC reported.

Elsewhere, insurgents seized all official border crossings in Syria and Jordan. The Jordanian army has been on full alert, protecting its borders against incursions, the Jordanian military said.

The Iraqi government insisted insurgents do not threaten Baghdad, nor the southern oilfields, which account for more than 75% 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.

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 $107.11, it probably will continue up to test $108.05. Should the second key resistance be broken, the US benchmark will most likely attempt to advance to $108.65.

If the contract manages to breach the first key support at $105.57, it will probably continue to drop and test $104.97. 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 $115.23. If breached, it will probably rise and probe $116.35. In case the second key resistance is broken, the European crude benchmark will probably attempt to advance to $117.03.

If Brent manages to penetrate the first key support at $113.43, it will likely continue down to test $112.75. With the second support broken, downside movement may extend to $111.63 per barrel.