Crude oil trading outlook: futures extend rout after API supply data

West Texas Intermediate crude slid from the lowest in more than two years, while Brent hovered near a four-year trough after bearish supply data by the American Petroleum Institute came in consonance with fears of declining demand, exacerbating a global supply glut. Market players now awaited the Energy Information Administrations government data, due today at 15:00 GMT.

November US crude traded 1.04% lower at $80.93 per barrel at 7:30 GMT on the New York Mercantile Exchange, having shifted in a daily range of $81.18-$80.29. The contract fell to $80.01 on Wednesday, the lowest since June 29th, and settled the day 0.1% lower at $81.78. Prices have declined in seven out of eight days.

Meanwhile on the ICE, Brent for delivery in December slid 0.68% to $83.55 per barrel. The European crude benchmark touched a daily low of $82.97 per barrel, the lowest since November 2012, while days high stood at $83.85. The contract fell 1.51% on Wednesday to $84.12 a barrel.

Industry group the American Petroleum Institute reported on Wednesday that US crude oil inventories expanded by 10.2 million barrels last week, while the median estimate of analysts surveyed by Bloomberg expect todays EIA statistics to show a 2.45-million-barrel jump. Distillate fuel inventories, which include diesel and heating oil, decreased by 156 000 barrels, while gasoline inventories declined by 3.1 million, API said. A decrease in both refined product categories is projected for EIAs data later today.

Oil prices extended their rout to fresh lows earlier in the week after the International Energy Agency said in its monthly report that global oil consumption will climb by only 650 000 barrels per day this year, a downward revision of 250 000 bpd from its prior estimate. This was the IEA’s fourth consecutive monthly forecast revision, with projections now slashed in half from July’s 1.3-million bpd growth estimate. The Paris-based agency also said that OPEC will need to supply around 200 000 barrels per day less crude this year and in 2015.

The Paris-based agency’s downward revision comes at a time of rising OPEC output, while US crude production is at its highest in almost three decades and Russians are closely trailing a post-Soviet record. OPEC pumped 30.47 million barrels of crude oil per day in September, the most since August 2013, while US domestic production was at 8.875 million bpd, the highest in 28 years.

Last week, the International Monetary Fund trimmed its global economic growth forecast to 3.8% next year, down from the previously expected in July 4.0%, fanning additional negative sentiment toward oil demand growth prospects.

Prices were further pushed down after Saudi Arabia decided to cut its prices to Asian buyers, followed by Iran and Iraq.

Venezuela’s foreign ministry said on October 10th that the country will seek an extraordinary OPEC meeting to discuss falling prices. However, oil ministers from Kuwait and Algeria dismissed possible output reductions.

Ali al-Omair, Kuwait’s oil minister, said that $76-$77 will probably be a strong area of support because that was the cost of production in the US and Russia. He said for the official Kuwait News Agency that while producers would like higher prices, there was “no room” to achieve that by cutting output.

Downbeat economic data this week from the US and Europe, coupled with sluggish inflation numbers from China also fanned negative sentiment for oil demand prospects, albeit upbeat trade data from the latter lent some support.

Daily pivot points

According to Binary Tribune’s daily analysis, West Texas Intermediate November futures’ central pivot point is at $81.41. In case the contract breaches the first resistance level at $82.82, it may test $83.85. Should the second key resistance be broken, the US benchmark may attempt to advance to $85.26.

If the contract manages to breach the first key support at $80.38, it might come to test $78.97. With this second key support broken, movement to the downside could continue to $77.94.

Meanwhile, December Brent’s central pivot point is projected at $84.51. The contract will see its first resistance level at $85.63. If breached, it may rise and test $87.15. In case the second key resistance is broken, the European crude benchmark may attempt to advance to $88.27.

If Brent manages to penetrate the first key support at $82.99, it could continue down to test $81.87. With the second support broken, downside movement may extend to $80.35 per barrel.

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