Crude oil trading outlook: WTI futures add ahead of EIA data, Brent steady

WTI futures climbed during early trade in Europe today, while Brent was steady, though both contracts were still uncomfortably close to multi-month lows, as investors eye US oil inventories data.

WTI futures for November delivery on the New York Mercantile Exchange traded at $91.79 per barrel at 7:30 GMT today, up 0.25% for the day. Prices had ranged from $91.44 to $91.92 per barrel. The US benchmark added 0.8% on Tuesday, reversing losses from Monday.

Meanwhile on the ICE in London, November Brent stood at $96.89 per barrel, up 0.04%, with prices between $96.40 and $97.01 per barrel. The contract’s premium its US counterpart narrowed to $5.10. The European brand added minor losses after sliding 1.5% on Monday, to a two-year low at $96.38.

“Weve got some push-pull factors working in the market at the moment,” Ben Le Brun, a market analyst at OptionsXpress in Sydney, said for Reuters. “The major point is that the market is very well supplied.”

Investors eye the upcoming US Energy Information Administration (EIA) weekly oil report. Last Wednesday the EIA reported the first build in stocks in five weeks, while production was logged at the highest level in 28 years.

The industry-funded American Petroleum Institute (API) posted its separate readings yesterday, boosting WTI contracts with a 6.5 million-barrel draw for crude, which would be the biggest draw in two months, if confirmed. The group also posted a 3m increase for distillates, a category which includes diesel and heating fuel, and a 0.1m build for gasoline.

A Bloomberg survey projected crude stocks had added 0.75 million barrels in the week through September 19, while gasoline was unchanged and distillates grew by 0.5m. A Wall Street Journal survey of analysts also showed small changes for crude and for products.

“We’re still seeing more supply,” Jonathan Barratt, the Sydney-based chief investment officer at Ayers Alliance Securities, said for Bloomberg. “The market is starting to discount a lot of what’s happening in the Middle East.”

The mostly-Arab US-led coalition made the first air strikes against targets of the Islamic State in Syria and the Levant (IS, ISIS, ISIL) on the territory of Syria yesterday, though the move failed to affect prices, as investors had already priced out much of any discount.

Meanwhile, Libya restarted operations at the Sharara oilfield, the biggest crude-production site in Africas largest crude reserves holder. The increase in Libyan output depressed crude to near multi-year lows on Monday, as it heralded the return of high-quality Libyan oil to the already over-supplied market.

Talks of a cut in output to be discussed and implemented by OPEC offered background support to crude last week, as investors sought cues as to the intentions of the world’s top oil-exporting body in regards to prices falling below the $100 benchmark. Many nations have set the $100 per barrel as a budgetary minimum, and prices lingering below the threshold hurts their public, and private, finances.

OPEC official moved to dispel speculation about an imminent output cut, but the group did lower its marketable oil expectations for 2015, signaling a decrease in production could follow as to meet market demand.

China, Eurozone

HSBC and Markit posted their preliminary figure on Chinese manufacturing PMI, logging at 50.5, above expectations also above the “50.0″ mark, signaling the sector has expanded in September. Factories are the bulk contributors to Chinese industrial output, which generates about 44% of the country’s GDP. At the same time, however, goods, such as those produced in factories, need to be physically transported, while factories tend to consume a lot of power and other fuels, hence the manufacturing PMI figure is a key leading gauge for oil demand.

The second-top economy in the world is also the second-top oil consumer, and will account for 11% of all demand this year, the International Energy Agency (IEA) says.

Meanwhile, manufacturing PMI figures for the Eurozone were also posted. France reported a surprisingly smaller than expected contraction in the factory sector, though still logging a decrease in activities, while Germany posted disappointing growth in the sector. Bloc-wide figure was recorded as expected, at 50.5. Although the industrial sector is just ~25% of the Eurozones economy, it still constitutes a massive chunk of transportation fuel demand. The EU consumes ~13% of all oil.

Technical support and resistance levels

According to Binary Tribune’s daily analysis for Monday, West Texas Intermediate November futures’ central pivot point is at $91.41. In case the contract breaches the first resistance level at $92.24, it will probably continue up to test $92.92. Should the second key resistance be broken, the US benchmark will most likely attempt to advance to $93.75.

If the contract manages to breach the first key support at $90.73, it will probably continue to drop and test $89.90. With this second key support broken, movement to the downside will probably continue to $89.22.

Meanwhile, November Brent’s central pivot point is projected at $97.00. The contract will see its first resistance level at $97.44. If breached, it will probably rise and test $98.04. In case the second key resistance is broken, the European crude benchmark will probably attempt to advance to $98.48.

If Brent manages to penetrate the first key support at $96.40, it will likely continue down to test $95.96. With the second support broken, downside movement may extend to $95.36 per barrel.