Crude oil futures trading outlook: WTI and Brent little changed ahead of key data

Both West Texas Intermediate and Brent crude benchmarks were little changed in early European trading on Tuesday as market players refrained from entering big positions ahead of a slew of crucial economic data from the United States and Europe. Global supply seen further outstripping demand offset geopolitical tension in several regions as market players saw little chance of oil shipments being disrupted.

On the New York Mercantile Exchange, WTI crude for delivery in September fell by 0.11% to $101.56 per barrel by 8:10 GMT. Prices ranged between a daily low of $101.31, not far off from yesterdays 1-1/2-week low of $100.90, and days high at $101.68 a barrel. The US crude benchmark closed 0.41% lower on Monday at $101.67.

Meanwhile on the ICE, Brent futures for settlement in the same month added 0.16% to trade at $107.74 a barrel, having shifted between $107.89 and $107.37 a barrel. The European crude benchmark lost 0.76% on Monday and settled at $107.57 a barrel. Brent traded at a premium of $6.18 to its US counterpart, up from Mondays close at $5.90. The gap had widened to $6.30 at Fridays close.

US crude remained pressured to the downside as a string of mixed US data on Monday suggested demand in the worlds biggest consumer may be softening and market players abstained from entering big positions ahead of this weeks crucial data releases, including FOMCs policy meeting outcome.

A preliminary services sector activity gauge released on Monday defied expectations and remained flat. The flash US Services PMI, prepared by Markit Economics, was unchanged at 61.0 in July, beating projections for a drop to 59.8. Levels above 50 indicate expansion in the respective sector.

Meanwhile, the National Association of Realtors reported that US pending home sales fell by 1.1% on a monthly basis in June, underperforming projections for a minor 0.5% gain after Mays 6.0% growth.

Up to come

Market players awaited the release of the remaining data for the week, as well EIAs crude oil inventories report and the outcome of FOMCs two-day policy meeting to assess demand prospects.

The Conference Board’s consumer confidence for July, due to be released on Tuesday, is expected to have inched up to 85.3 from a month earlier.

On Wednesday, the US Commerce Department is likely to report that the US economy grew by an annualized 3.0% in the second quarter, compared to the preceding three months’ 2.9% contraction. Also on Wednesday, the Federal Open Market Committee will conclude its two-day policy meeting.

On Thursday, we are likely to see a moderate jump in initial jobless claims for the week through July 25th, but they are likely to remain in the shadow of Friday’s non-farm payrolls and unemployment rate for July. US employers are likely to have added 230 000 jobs this month, compared to 288 000 in June, while the unemployment rate is anticipated to have remained flat at 6.1%.

Also due on Friday are the Markit Economics Manufacturing PMI, projected to come out unchanged, the ISM Manufacturing Report on Business and the Reuters/Michigan Consumer Sentiment Index, both expected to have marked an improvement.

In Europe, economic releases this week will include the major economies consumer inflation, unemployment rate and manufacturing activity growth, as well as the same categories for the Eurozone as a whole.

US crude inventories levels

Investors also eyed upcoming US inventories data, released by API at 20:30 GMT, as well as Wednesdays government statistics provided by the Energy Information Administration.

According to a weekly Bloomberg survey ahead of EIAs report, the government data is expected to show that US crude oil inventories fell by 1 million barrels in the seven days through July 25th.

However, gasoline stockpiles, more closely watched during the summer driving season, are expected to have increased by another 1 million barrels to 218.9 million, hitting the highest level since March. Distillate fuel supplies likely jumped by 1.5 million barrels, the survey showed.

Crude contracts were further pressured as annual forecasts for global supply and demand turned more bearish. Morgan Stanley analysts led by Adam Longson said in a note, cited by CNBC: “Barring new supply outages, we see global supply capacity rising by 1.8 million barrels per day (bpd) in 2014 – the fastest growth in a decade.” This compares to predictions for a jump in global demand of 1.1 million barrels per day.

Geopolitcal turmoil with little effect

European and US leaders agreed on Monday to further sanction Russias financial, energy and defense sectors, which however is expected to have no impact on shipments from the worlds biggest energy exporter.

In Libya, continuing clashes between Libyan government forces and Islamist militants in Benghazi over the weekend led to the death of more than 35 people, keeping supply prospects uncertain.

The Libyan government announced on Monday that an oil depot near Tripoli’s international airport caught fire during clashes between rival militias, and sought international help. However, tension in Libya, whose output dropped by 20% from last week to 450 000 bpd as of Monday, has already being priced in the market and has little effect on price movements.

In Iraq, conflicts with Islamists in the north left oil production in the countrys south untouched, keeping oil exports unharmed at record-high levels. The market, however, gained some support as clashes in the Gaza strip seemed to have no prospects of being ended soon. Israeli Prime Minister Benjamin Netanyahu warned of a prolonged war after the latest attack from Palestinian fighters.