Crude oil futures trading outlook: WTI and Brent little changed ahead of US supply data, geopilitics

Both West Texas Intermediate and Brent crude benchmarks were little changed on Wednesday, hovering near multi-month low levels, ahead of US supply data expected to show a drop in US crude inventories and a third consecutive decline in gasoline and distillate fuel supplies. A stronger dollar, rising Libyan output and Iraqi forces gaining ground on Islamic State militants helped push prices lower. However, ongoing clashes in eastern Ukraine and renewed fighting in the Gaza Strip kept the market underpinned.

On the New York Mercantile Exchange, WTI crude for settlement in October stood at $92.86 per barrel at 6:58 GMT, down 0.01% on the day. Prices held in a daily range between $92.97 and $92.73, close to Tuesdays 8-1/2-month low of $92.62 a barrel. The contract lost 0.95% on Tuesday after shedding 1.65% on Monday, closing the session at $92.86.

Meanwhile on the ICE, Brent futures for delivery in the same month slid 0.02% to trade at $101.54 a barrel, having ranged between $101.70 and $101.44, close to Tuesdays trough of $101.07, the lowest since June 26 2013. The European crude benchmark traded at a premium of $8.68 to its US counterpart, down from Tuesdays settlement at $8.70.

US crude was little changed as market players awaited the release of EIAs inventory statistics. The American Petroleum Institutes private report showed on Tuesday that US crude supplies fell by 1.4 million barrels last week, while distillate fuel inventories decreased by 568 000 barrels. Gasoline inventories, more closely watched during the peak summer driving season, fell by 2.1 million barrels.

According to a weekly Bloomberg survey ahead of the government data, crude oil inventories are expected to have declined by 1.75 million barrels in the seven days through August 15th. Gasoline stockpiles are anticipated to have dropped by 1.55 million barrels while distillate fuel supplies, which include diesel and heating oil, probably slid by 300 000 barrels.

A stronger dollar weighed on dollar-denominated commodities, including oil. The US dollar index, which measures the greenbacks strength relative to six major trading peers, held close to an 11-1/2-month high of 82.070 which was touched earlier in the trading session.

Geoplitics

Oil prices were pressured down after Iraqi forces and Kurdish fighters managed to retake the Mosul dam with the help of US air support and are seeking to reverse Islamic State militants advance through northern Iraq.

Faleh al-Issawi, the deputy head of Anbar provincial council in the west, said, cited by Bloomberg, that around 100 rebels were killed and 50 vehicles destroyed in the three days of air strikes conducted by US air forces.

President Barack Obama said on Monday that the US will continue limited air strikes against the rebels.

Civil unrest in Iraq, OPEC’s second-largest producer, has so far failed to disrupt oil output in the southern parts of the country, which accounts for around three quarters of nationwide production.

Also pressuring down oil prices, a spokesman for the Libyan National Oil Corporation said nationwide crude output has risen to 562 000 barrels per day this week from 535 000 bpd during the weekend.

However, despite the current success of the military campaign in Iraq, continuing unrest in OPECs second-largest oil producer, as well as persisting tensions in Ukraine and the Gaza Strip will keep the market supported to some extent. Islamic State insurgents released a video on Tuesday showing the beheading of US journalist James Foley and threatening to kill another US journalist, saying his life depends on how the US acts in Iraq.

In the Gaza Strip, an extended truce was broken on Tuesday as Israel responded to rocket fire. Israel said that around 50 rockets were fired from Gaza yesterday and 20 more were launched on Wednesday but no injuries have been reported. A Hamas official in Cairo said Israel in turn had been targeting Mohammed Deif, the head of its armed wing.

Local medics said that eight people, allegedly from the same family, were killed by an Israeli strike in central Gaza on Wednesday morning and, according to officials, around 100 Palestinians have been wounded since the truce ended. In all, more than 2 000 Palestinians and almost 70 Israelis have been killed since Israel began its attacks on Gaza on July 8th.

Ukraine

Heavy fighting and street-to-street battles were reported from Luhansk, one of two remaining pro-Russian separatist bastions. The Ukrainian military said advances have been made in Luhansk, and Kiev now controls one of the districts. Several smaller towns were also captured.

Civilians are reported fleeing by the thousands daily, with several hundred thousand already displaced by the conflict, while the death toll has climbed to over 2 000, the United Nations said.

A civilian convoy, evacuating wounded non-combatants, came under attack on Monday, killing at least 17 people, Kiev said. The convoy was escorted by Ukrainian military and was not moving in an established humanitarian corridor. Kiev accused the rebels of the attack, while separatist leaders put the blame on the Ukrainian military.

Meanwhile, Ukrainian sources said another convoy of dozens of Russian armored vehicles entered rebel-held territory late on Tuesday, after 2 other groups of Russian military machines were detected, one destroyed by Ukrainian forces.

Technical support and resistance

According to Binary Tribune’s daily analysis, West Texas Intermediate October futures’ central pivot point is at $93.28. In case the contract breaches the first resistance level at $93.95, it will probably continue up to test $95.03. Should the second key resistance be broken, the US benchmark will most likely attempt to advance to $95.70.

If the contract manages to breach the first key support at $92.20, it will probably continue to drop and test $91.53. With this second key support broken, movement to the downside will probably continue to $90.45.

Meanwhile, October Brent’s central pivot point is projected at $101.57. The contract will see its first resistance level at $102.06. If breached, it will probably rise and test $102.57. In case the second key resistance is broken, the European crude benchmark will probably attempt to advance to $103.06.

If Brent manages to penetrate the first key support at $101.06, it will likely continue down to test $100.57. With the second support broken, downside movement may extend to $100.06 per barrel.