Crude oil trading outlook: WTI and Brent futures slide ahead of EIA report

WTI and Brent futures were losing during early hours in Europe today, as traders await key US inventories readings. Experts suggest US demand might prove sluggish, pressuring crude. Meanwhile, the EU agreed on more sanctions on Russia yesterday, in light of the MH17 incident.

WTI for September delivery traded for $101.98 per barrel at 7:07 GMT in New York today, down 0.40%. Prices ranged from $101.79 to $102.19 per barrel. The contract dropped 0.46% on Tuesday, after adding 0.89% the previous session.

Meanwhile, Brent September futures stood at $107.11 per barrel, down 0.20%. Daily high and low were at $107.41 and $106.87 per barrel, respectively. Brents premium to WTI was at $5.13, after last sessions closing margin of $4.94. The European contract lost 0.33% yesterday, after adding 0.41% on Monday.

“There’s some nervousness that the demand that was anticipated isn’t coming through, so we’ll see a cautious session leading into those numbers,” Michael McCarthy, chief strategist at CMC Markets in Sydney, said for Bloomberg, addressing the upcoming oil report.

US oil inventories

The private American Petroleum Institute (API) posted its readings on US oil stocks yesterday, revealing a 0.555 million-barrel draw for crude, less than expected. Gasoline and distillates added 3.6 and 2.5 million barrels, respectively.

The official Energy Information Administration (EIA) report is due later today. A Bloomberg survey suggested crude stocks dropped 2.9 million barrels, gasoline inventories were projected to have added 1 million barrels, while distillates were said to have added some 2 million.

Last weeks EIA report posted a 7.525 million-barrel draw for commercial crude oil inventories, while gasoline and distillates added 0.171 million and 2.528 million barrels, respectively.

Libya

Libya reported a drop in output on Monday, for a production rate of 450 000 barrels per day, some 20% lower than last week, but still negligible in terms of absolute value.

Outlooks, however, were on the upside for Africas largest reserves holder, as protesting security guards agreed to relieve the Brega oil-exporting port, allowing an export capacity of some 100 000 barrels per day to restart operations.

The country has a potential output of about 4.5 million barrels daily, but it has seen mostly chaotic violence since the ousting of the former dictator Muammar Gaddafi, crippling its main industry.

Many armed groups vie for power and control swathes of territory. Monday saw a twin suicide-bombing in the second city of Benghazi, killing four soldiers.

Ukraine

The “black boxes” of flight MH17, which was shot down over rebel-held territory in eastern Ukraine last week, were handed over to Dutch authorities by Malaysian officials, after the latter had received them from the pro-Russian rebels earlier this week. The devices are to be examined in the UK for cues as to what was the precise cause of the incident.

The US and UK had earlier expressed confidence that the airliner was shot down by a Russian-supplied Buk missile, fired by pro-Russian rebels. The US later added that the “most plausible explanation” for the incident was the rebels probably mistook the airliner for a Ukrainian military plane, the BBC reported.

“Its a solid case that its an SA-11 [missile] that was fired from eastern Ukraine under conditions the Russians helped create,” one official said for the BBC.

The insurgents had already downed a number of Ukrainian military aircraft, including several helicopters and warplanes, one of which was said to have been flying at an altitude of at least several kilometers, suggesting a Buk missile was used.

Sanctions

The EU agreed to expand the list of sanctioned individuals and organizations, officials said after a meeting on Tuesday. The list is to be drafted and released by Thursday, and is said to include measures on defense, finance and “dual-use” items in the energy and high-tech sectors.

Hours before MH17 was shot down, the US introduced a new set of sanctions towards Russia, as Kremlins efforts to deescalate the conflict in Ukraine were seen as insufficient. The US limited capital market access to Russian energy firms, in a move towards real economic sanctions, going a step further than the EU has so far.

The EU and US started imposing sanctions to Russian and Ukrainian individuals and companies deemed liable for Moscow’s annexation of the Crimea earlier this year. The restrictions were expanded several times later on, as the West saw Russian support for rebels in eastern Ukraine, accusing the Kremlin of supplying the separatists with weapons, training and “volunteers”.

Moscow has denied it has any connections with the rebels. During the Crimean annexation, Russian President Vladimir Putin had also dismissed the Kremlin’s involvement, only to later admit that it was Russian forces, which occupied the peninsula and drove off the Ukrainian security personnel.

Technical view

According to Binary Tribune’s daily analysis, in case West Texas Intermediate September futures breach the first resistance level at $103.26, they will probably continue up to test $104.13. Should the second key resistance be broken, the US benchmark will most likely attempt to advance to $104.81.

If the contract manages to breach the first key support at $101.71, it will probably continue to drop and test $101.03. With this second key support broken, the movement to the downside will probably continue to $100.16.

Meanwhile, September Brent on the ICE will see its first resistance level at $108.21. If breached, it will probably rise and test $109.09. In case the second key resistance is broken, the European crude benchmark will probably attempt to advance to $109.78.

If Brent manages to penetrate the first key support at $106.64, it will likely continue down to test $105.95. With the second support broken, downside movement may extend to $105.07 per barrel.