WTI and Brent futures were lower during early trade in Europe today. Both contracts were pressured yesterday, as the US posted weekly readings on oil stocks. Libyan rebels handed two of the countrys biggest ports to authorities, while Iraq seemed closer to partition, though the south was seen safe.
West Texas Intermediate futures for settlement in August traded for $104.12 per barrel at 6:11 GMT on the New York Mercantile Exchange, down 0.34%. Prices ranged from $104.29 to $103.95 per barrel. The US contract dropped 0.82% yesterday, and so far this week WTI has lost about 1.2%.
Meanwhile on the ICE in London, Brent futures due in August stood for a 0.22% drop at $111.00 per barrel. Daily high and low stood at $111.11 and $110.72 per barrel, respectively. Brent’s premium to WTI stood at $6.88, after last session’s closing margin of $6.76. The European contract dropped 0.94% on Wednesday, and so far this week Brent has also lost about 1.2%.
“Libya will just add more supply, and the world is awash with oil,” Jonathan Barratt, chief investment officer at Ayers Alliance Securities in Sydney, said by phone for Bloomberg. “There’s nothing new from Iraq and investors are starting to realize that there’s not going to be a major affect in terms of supply.”
Libya supply
Two oil-exporting ports in eastern Libya have been reopened after being closed for almost a year due to insurgency. The Es Sider and Ras Lanuf facilities are Libyas biggest and third-biggest ports, and have a combined potential exporting capabilities of more than 0.5 million barrels per day. If they indeed reach optimal capacity they will increase Libyas output five times, Bloomberg reported.
The rebels who had occupied the ports have handed them over to the newly elected government as a sign of support.
Libyas output has dwindled since the ousting of former dictator Muammar Qaddafi, with exports dropping from 4 million barrels per day, to some 150 000 earlier this year. Libya holds Africas largest crude oil reserves.
US oil report
The US Energy Information Administration (EIA) posted its weekly oil inventories report for the seven day through June 27 today. The log revealed a 3.155 million-barrel draw for commercial crude oil inventories, after the private American Petroleum Institute (API) had suggested a 0.9 million-barrel draw on Tuesday. A Bloomberg survey projected a 2.4 million-barrel drop. The previous reading, for the week through June 20, showed crude inventories had added 1.7 million barrels.
Oil at Cushing, Oklahoma, the delivery point for the NYMEX contract and the largest hub in the US, was reported at 20.5 million barrels for a 1.3 million-barrel draw, after a gain of 400 000 was logged for the previous week. Meanwhile, hubs at the Gulf Coast lost 3 million barrels, after 2 million were added last week.
Domestic production of crude oil was unchanged for a reading of 8.442 million barrels per day (bpd), after minor drop was recorded in the report for the week ended June 20. Meanwhile, imports of crude were slightly lower at 7.265 million bpd, after minor gains last week. Inbound shipments of crude have by about 1.4 million bpd over the past month, about 20% of current imports.
Gasoline inventories dropped 1.235 million barrels for the week through June 27, while the API had reported a 0.4 million-barrel draw, after last week saw 0.7 million barrels added. Distillate fuels stockpiles levels grew by 0.975 million barrels, while the API posted a 4.4 million-barrel increase on Tuesday. Previously, distillates inventories had added 1.2 million barrels in the week through June 20.
Refinery utilization rate was increased by 3% for a standing of 91.5%, after a 1.4% increase was logged in the previous report. Gasoline production this week grew by some 0.4 million bpd for a standing of 9.436 million bpd, after a massive 10%, or 0.8 million bpd drop was recorded last week. Distillates output averaged 4.984 million bpd for a minor weekly increase, after another unimpressive increase was recorded last week.
Economic outlook
A key report on US employment will be posted later today. The unemployment rate for June is set for an unchanged 6.3%, while nonfarm payrolls have probably added 210 000 – 213 000, after a 217 000 figure for May. ADP posted its separate reading yesterday, for a massive increase in payrolls at 281 000 new positions, after it suggested 179 000 for the previous month. The official figure for May was 217 000. Payrolls are the foremost leading indicator for the overall health of the economy.
Also today, ISM will post its non-manufacturing PMI for June, and analysts expect steady growth in the services sector as well, with a suggested figure of 56.3, same as last month. A reading of 50 or higher means expansion of economic activities, and vice versa. The bigger the distance from 50, the greater the pace of contraction or expansion. The services sector accounts for about 80% of US GDP.
Iraq
Abu Bakr al-Baghdadi, the leader of the Sunni-extremist Islamic State in Syria and the Levant (ISIS), called on Muslims everywhere to flock to the new “Islamic state”, and demanded they take the path of Jihad, the BBC reported yesterday. The group proclaimed the creation of the “Islamic state” earlier and declared its leader a “Caliph”, adding that all Muslims owe him allegiance and “reject democracy and other garbage from the West”.
In Syria, where ISIS also has a strong grip on vast swathes of land, militants paraded with armored personnel carriers and other military hardware, including a SCUD missile. The insurgents are said to be fighting both the Syrian authorities and other, more moderate opposition forces. The Syrian military bombed positions of the militants in Iraq last week, in a move welcomed by Iraqi PM Nouri Maliki.
Meanwhile, the Iraqi military have had inconclusive fights with militants for the city of Tikrit. The army was urgently reinforced by Russian and Belorussian fighter aircraft, purchased by the government in haste. Elsewhere, militants tighten their grip on the northern provinces of the country, with the Kurdish semi-autonomous state recently joining the fight against the jihadists.
Sunnis, Kurds
In Baghdad, the Iraqi government failed to elect a new leadership earlier this week, as Sunni-Muslim and Kurdish representatives boycotted the vote and the election body failed to reach a quorum. The current Iraqi government, led by PM Maliki, is said to be quite exclusive of ethnicities other than Shia-Muslims, which represent about 65% of Iraq’s population.
The Kurdish semi-autonomous government in northern Iraq has recently come under attack by ISIS, and its military is seen as stout defense of the major northern oilfield around Kirkuk. The Kurds occupied Kirkuk, which lies beyond the autonomous government’s borders, after the Iraqi army fled from the Islamists. Now the Kurds, who have long yearned independence, claim they will not leave Kirkuk before an independence referendum takes place.
Israel spoke in support of an independent Kurdish state earlier this week. The Kurds “are a nation of fighters and have proved political commitment and are worthy of independence,” Israeli Prime Minister Benjamin Netanyahu said.
The Iraqi government insists insurgents do not threaten Baghdad, nor the southern oilfields, which account for more than 75% of Iraqi oil output. Furthermore, the Iraqi oil minister said production and exports will actually increase over the next month.
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 $105.31, it probably will continue up to test $106.13. Should the second key resistance be broken, the US benchmark will most likely attempt to advance to $106.74.
If the contract manages to breach the first key support at $103.88, it will probably continue to drop and test $103.27. With this second key support broken, the movement to the downside will probably continue to $102.45.
Meanwhile, August Brent on the ICE will see its first resistance level at $112.13. If breached, it will probably rise and probe $113.03. In case the second key resistance is broken, the European crude benchmark will probably attempt to advance to $113.63.
If Brent manages to penetrate the first key support at $110.63, it will likely continue down to test $110.03. With the second support broken, downside movement may extend to $109.13 per barrel.
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