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

WTI and Brent prices continued downwards during early trade in Europe today, reaching new nine-month lows. Traders shrugged off risks over Iraq and Ukraine, as the International Energy Agency said the conflicts had not affected supplies, and the global market is facing a glut.

WTI for delivery in September traded at $97.17 per barrel at 7:30 GMT on the New York Mercantile Exchange, down 0.21%. Prices ranged from $97.06 to $97.29 per barrel. The contract lost 0.72% yesterday, reaching an eight-month low of $96.81.

Meanwhile, September Brent on the ICE in London stood at $102.53 per barrel, down 0.48%, daily prices between a nine-month low of $102.47 and $102.99. The contracts premium to its US counterpart was $5.36, after last sessions closing margin of $5.65. Brent dropped 1.59% on Tuesday, after a further 0.3% loss on Monday.

“The supply situation is adequate,” David Lennox, resource analyst at Fat Prophets in Sydney, said for Bloomberg. “Output from the U.S. is taking care of any growth in their market, and the rest of the world is being serviced by OPEC.”

US oil supplies, IEA outlook

The industry-funded American Petroleum Institute posted its weekly readings on US oil inventories yesterday. The industry group reported a 2 million-barrel increase for crude stocks, while gasoline was projected to have added 2.7 million, in a surprisingly bearish log.

The official Energy Information Administration (EIA) report is due later today. A Reuters poll suggested crude stocks decreased by 2.2 million barrels last week, with gasoline dropping as well, while a Bloomberg survey projected 1.75 million barrels of crude were drawn, alongside 1.5 million barrels of gasoline.

Last week’s log revealed a 1.8 million-barrel draw for crude stockpiles, levels dropping to the lowest since late February. Gasoline stocks lost 4.4 million barrels, while distillate fuels, which include diesel and heating oil, were down 1.8 million barrels.

Meanwhile, the International Energy Agency (IEA), which advises industrialized economies, downgraded its global oil demand growth outlook for this year and for 2015. At the same time, the US EIA also revised its demand projection, while reporting the highest US crude output in almost 30 years.

“The IEA was definitely a trigger behind the days selling,” Jim Ritterbusch, president of energy-advisory firm Ritterbusch & Associates, said for The Wall Street Journal yesterday. “It brought home what most of us had been expecting…which was a weaker pace of demand across this year.”

The IEA said that despite ongoing geopolitical conflicts, the market is adequately supplied, with OPEC reporting its exports have grown by 0.3m barrels per day in July, and the Atlantic Basin facing a glut in Autumn.

Iraq, Ukraine

Investors continued to monitor developments in the Middle East and Ukraine, as both Iraq and Russia are still facing a quite real possibility of export disruption.

“In these past weeks during the selloff, the market completely put aside or underestimated the growing geopolitical risk, which in fact has been increasing,” Edouard Mouton, head of the quantitative desk at Diapason Commodities Management SA in Lausanne, Switzerland, said for The Wall Street Journal.

Iraq, OPECs second-top oil producer, with exports of 2.5m barrels per day, would receive more help, as the country fights against jihadists of the Islamic state, US and Iraqi authorities reported. The US have begun supplying Kurdish forces with weaponry, while also aiding fleeing civilians via air drops of food, water and medicine. France and the UK have also been flying aid to the displaced and ravaged civilians.

Meanwhile, Iraqi politics are also on the table, with incumbent PM Nouri Maliki refusing to step down, after President Fouad Massoum declined to nominate him for third term, effectively disregarding the constitution. He offered the job to a more consensual figure, the deputy parliament speaker Haider al-Abadi. Maliki deployed forces personally loyal to him in Baghdad on Monday, and vowed to “fix the mistake” of the President, but there have been no reports of violence so far.

Elsewhere, Ukraine is preparing to receive a convoy of Russian humanitarian aid, which caused some concern and controversy earlier. NATO had warned Moscow not to use humanitarian or peacekeeping incentives in order to send troops to Ukraine, while warning that Russia has massed a significant number of combat-ready troops on the border.

The Kremlin insisted on the humanitarian nature of the convoy, and has denied any intention to invade Ukraine or that it supports in any way the pro-Russian separatists in its neighbor.

Russia is subject to increasingly tougher economic sanctions by the West over its involvement with the crisis in Ukraine, which started last year. So far sanctions have failed to disrupt energy exports, but tensions are as high as ever.

“There arent really any supply disruptions with geopolitical developments,” Roland Austrup, chief executive of Integrated Managed Futures Corp. in Toronto, said for The Wall Street Journal. “Theres no catalyst to push prices higher.”

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 $97.38. In case the contract breaches the first resistance level at $97.96, it will probably continue up to test $98.54. Should the second key resistance be broken, the US benchmark will most likely attempt to advance to $99.12.

If the contract manages to breach the first key support at $96.80, it will probably continue to drop and test $96.22. With this second key support broken, movement to the downside will probably continue to $95.64.

Meanwhile, September Brent’s central pivot point on the ICE is projected at $103.43. The contract will see its first resistance level at $104.20. If breached, it will probably rise and test $105.39. In case the second key resistance is broken, the European crude benchmark will probably attempt to advance to $106.16.

If Brent manages to penetrate the first key support at $102.24, it will likely continue down to test $101.47. With the second support broken, downside movement may extend to $100.28 per barrel.