Crude oil trading outlook: WTI and Brent futures steady as Iraq, Ukraine weighed

WTI and Brent prices were little changed during early trade in Europe today. The US conducting air strikes on jihadists in Iraq sent mixed signals to markets, while PM Malikis stunt had no apparent impact on prices.

WTI for September delivery on the New York Mercantile Exchange traded at $97.78 per barrel at 7:34 GMT, up 0.13%. Prices ranged from $97.37 to $98.07 per barrel. The contract dropped 0.2% last week.

Meanwhile, September Brent on the ICE in London was down 0.10% at $104.91 per barrel. Daily low and high were at $104.68 and $105.34 per barrel, respectively. Brents premium to WTI narrowed to $7.13.

“Despite the fact that there are several ongoing geopolitical conflicts, oil prices have remained significantly lower than they should be,” Hong Sung Ki, analyst at Samsung Futures Inc. in Seoul, said for Bloomberg today. “WTI prices will show a continuous rise up to $100.”

Middle East

Iraqi PM Nouri Maliki said he will take Iraqs president Fuad Masum to court over what Maliki called a “coup”, after the President refused to offer Mr Maliki, whose party won majority in Aprils election, a mandate to form a government.

There have been ever increasing calls for Mr Maliki to step down, and for a more inclusive government to be formed, with better representation of the Kurdish and Sunni Muslim minorities.

Under the current informal agreement, Iraq has a Kurd for a President, a Sunni Muslim Speaker of Parliament, and a Shia Prime Minister, who holds real executive power.

Soon after Mr Maliki went on TV to accuse the President, security forces loyal to the PM appeared in Baghdad. No confrontations were reported, but the move was widely seen as a show of force by the PM, who has dismissed the calls to step down.

The US expressed their full support for President Masum, while continuing to support Kurdish fighters in their struggle against the Islamic State (IS). Meanwhile, Kurdish authorities asked for arms to fight the “better-equipped” IS militants.

IS has been fighting Kurds and the central Shia-led government, while seeing support from a number of Sunni tribes and former Saddam-era military officers, Saddam himself a Sunni Muslim.

The country is OPECs second-top oil exporter, with an output of some 3 million barrels per day. The conflict has so far failed to disrupt in any way Iraqs oil production and exports, with the latest US air strikes seen as stabilizing security against IS, though putting in question Iraqs ability to defend itself. Malikis show of force has not affected prices so far.

Elsewhere, Hamas and Israel agreed to a new 72-hour ceasefire, after the conflict reignited with the expiration of the last truce on Friday. Israeli airstrikes continued throughout the weekend, killing 20 more Palestinians.

Ukraine

The Ukrainian military said it has gained more ground against the pro-Russian separatists in Donetsk, pointing that the rebels were in “panic and chaos” and had begun to desert en masse.

“A large number of enemy hardware and personnel was destroyed. Panic and chaos have been noted among the terrorists,” military spokesman Oleksiy Dmytrashkivsky said.

The separatists strongholds of Donetsk and Luhansk have been under siege for more than a week now. Rebels called for a ceasefire, but the proposal was dismissed by Kiev.

Meanwhile, Russia offered humanitarian aid once more, with Ukrainian President Petro Poroshenko saying he would consider it, only if it is international and unarmed.

Moscow was warned by NATO to not use a humanitarian or peacekeeping mission as a pretext to send troops to Ukraine, in light of a recent build up of Russian combat-ready troops near the Ukrainian border.

Russia is the worlds top energy exporter, and is facing increasingly tougher economic sanctions by the West over its alleged role in destabilizing Ukraine. Sanctions have so far failed to affect energy exports, but some analysts are seeing the dawn of a new Cold War.

Technical support and resistance levels

According to Binary Tribune’s daily analysis, West Texas Intermediate September futures’ central pivot point on the NYMEX is at $97.75. In case the contract breaches the first resistance level at $98.35, it will probably continue up to test $99.05. Should the second key resistance be broken, the US benchmark will most likely attempt to advance to $99.65.

If the contract manages to breach the first key support at $97.05, it will probably continue to drop and test $96.45. With this second key support broken, movement to the downside will probably continue to $95.75.

Meanwhile, September Brent’s central pivot point on the ICE is projected at $105.51. The contract will see its first resistance level at $106.36. If breached, it will probably rise and test $107.69. In case the second key resistance is broken, the European crude benchmark will probably attempt to advance to $108.54.

If Brent manages to penetrate the first key support at $104.18, it will likely continue down to test $103.33. With the second support broken, downside movement may extend to $102.00 per barrel.