Crude oil trading outlook: WTI and Brent futures little changed ahead of inventories data, FOMC decision

Both West Texas Intermediate and Brent crude benchmarks were little changed on Wednesday as market players eyed upcoming US supplies statistics, as well as the outcome of FOMCs two-day policy meeting and US Q2 GDP growth. Geopolitical tension in several key regions kept a floor under prices.

On the New York Mercantile Exchange, WTI crude for delivery in September traded at $101.46 per barrel at 7:14 GMT, up 0.49% on the day. Prices shifted in a daily range between $101.61 and $100.86 a barrel. The US crude benchmark fell to a two-week low of $100.37 on Tuesday and closed the day 0.69% lower at $100.97.

Meanwhile on the ICE, Brent futures for delivery in the same month shed 0.04% to trade at $107.63 a barrel, having varied between days high of $107.83 and low of $107.35 a barrel. The contract rose by 0.14% on Tuesday to settle at $107.72. Brent traded at a premium of $6.17 to its US counterpart, down from Tuesdays close at $6.75 which was the widest since July 4th.

US crude drew some support after private data by the American Petroleum Institute showed yesterday a larger-than-projected decline in US crude supplies and smaller-than-expected builds in gasoline and distillate fuel stockpiles. This offset the shutdown of a 115 000-bpd refinery in Kansas which caught fire, which lowered demand for crude oil.

According to APIs report, crude inventories fell by 4.4 million barrels last week, compared to expectations for a 2.1-million drop, while distillate fuel supplies rose by 0.547 million, beating projections for a 1.4-million gain. Gasoline stockpiles, the more closely watched refined product category, jumped by e mere 60 000 barrels, the API said, outperforming expectations for a gain of 1.1 million barrels. Supplies at Cushing, Oklahoma, fell by 914 000 barrels.

APIs data, however, is considered as less reliable than EIAs statistics. According to a Bloomberg survey, the government report is poised to show that crude inventories lost 1.25 million barrels and amounted to 369.8 million, while gasoline stocks are projected to have jumped by 1 million barrels to 218.9 million, the highest level since March. Distillate fuel supplies likely jumped by 1.5 million barrels, the survey showed.

US data

Market players refrained from entering big positions ahead of the release of the initial second-quarter US GDP growth reading, as well as the outcome of FOMCs two-day policy meeting.

The 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.

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.

Investors will also scour key inflation and employment data from Europe through the end of the week, as well as manufacturing activity gauges from China on Friday.

Geopolitical risk premium

Ongoing geopolitical turmoil in several key regions of interest for the oil market kept a floor under prices, although the lack of fear of any changes to global supply kept support limited.

EU leaders agreed yesterday on their toughest sanctions against Russia to date, limiting the export of equipment used to modernize the oil industry and prohibiting the sale of equipment for military purposes, as well as barring state-owned banks from selling bonds or shares in Europe. Several hours later, the US imposed sanctions on three Russian banks and a state-owned shipbuilding company. The focus now fell on President Vladimir Putins response to the new round of penalties.

Jonathan Barratt, chief investment officer at Ayers Alliance Securities in Sydney, said, cited by CNBC: “Lets remember that Russia is the worlds largest producer, and it supplies much energy to Europe. You could expect that if they decided to trim back production, Brent will trade higher and the WTI-Brent spread will widen.”

Elsewhere on the geopolitical scene, a Libyan official said that nationwide crude output is at around 500 000 barrels per day, in spite of the escalating violence in Tripoli. The Libyan government said on Monday that an oil depot near Tripoli’s international airport caught fire during clashes between rival militias, and sought international help.

In Iraq, conflicts with Islamist militants in the north left oil production in the country’s south untouched, keeping oil exports unhaffected at record-high levels.

Meanwhile, clashes in the Gaza strip seemed to have no prospects of being ended soon. Israeli Prime Minister Benjamin Netanyahu warned earlier in the week of a prolonged war after the latest attack from Palestinian fighters.

Technical view

According to Binary Tribune’s daily analysis, in case West Texas Intermediate September futures breach the first resistance level at $101.74, they will probably continue up to test $102.52. Should the second key resistance be broken, the US benchmark will most likely attempt to advance to $103.20.

If the contract manages to breach the first key support at $100.28, it will probably continue to drop and test $99.60. With this second key support broken, movement to the downside will probably continue to $98.82.

Meanwhile, September Brent on the ICE will see its first resistance level at $108.14. If breached, it will probably rise and test $108.55. In case the second key resistance is broken, the European crude benchmark will probably attempt to advance to $109.06.

If Brent manages to penetrate the first key support at $107.22, it will likely continue down to test $106.71. With the second support broken, downside movement may extend to $106.30 per barrel.