Crude oil trading outlook: futures rise on US supply data, consumer confidence

Both West Texas Intermediate and Brent benchmark crudes rose for a second day after private data showed a larger-than-projected decline in US refined products inventories, signaling accelerating fuel demand. Consumer confidence rising to the highest in seven years also fanned positive sentiment.

December US crude traded at $81.81 per barrel at 7:58 GMT, up 0.48% on the day, having shifted in a daily range of $82.00-$81.44. The contract rose by 0.52% to $81.42 on Tuesday, the highest close since October 23rd.

Meanwhile on the ICE, Brent futures for settlement in the same month added 0.43% to trade at $86.40. Prices shifted between $86.70 and $86.06 during the day. The European crude benchmark rose 0.23% on Tuesday to $86.03, the highest since October 24th. Brents premium to its US counterpart narrowed to $4.59 from yesterdays close of $4.61.

The oil market drew support after data by industry group the American Petroleum Institute showed that US crude oil inventories rose by 3.2 million barrels last week, largely in line with expectations, but a significant drop in refined products hinted to improving fuel demand. Motor gasoline inventories declined by 3.7 million barrels, while distillate fuel stockpiles, which include diesel and heating oil, declined by 3 million barrels.

APIs data, however, is deemed less reliable than government statistics provided by the Energy Information Administration. The industry groups report is based on voluntarily provided information by operators of refineries, bulk terminals and pipelines, while the government requires reports to be filed with the EIA.

According to a Bloomberg survey ahead of EIAs supply data today, crude oil inventories are projected to have risen by 3.65 million barrels in the week ended October 24th, while motor gasoline stockpiles likely declined by 0.9 million barrels to 203.5 million. Distillate fuel stocks are projected to have slid by 1.4 million barrels.

Confidence

Oil prices also gained support as US consumer confidence raced to the highest since before the 2008 economic crisis as the labor market continued to improve, while gasoline prices slid. The Conference Board reported that its consumer sentiment index raced to 94.5, the highest since October 2007, defying analysts’ projections for a drop to 87.0. September’s reading received an upward revision to 89.0 from initially estimated at 86.0.

Meanwhile, preliminary data by Japans Ministry of Economy, Trade and Industry showed that the Asian countrys industrial production expanded by a better-than-expected 2.7% in September on a monthly basis, reversing a 1.9% contraction in August. This was the fastest pace of industry output growth since January.

Hong Sung Ki, a senior commodities analyst at Samsung Futures Inc. in Seoul, said for Bloomberg: “Oil prices have been supported by better-than-expected economic indicators we’ve been getting from countries including the U.S. and Japan. We can’t expect a strong rebound in oil but I’d say the sharp decline is now over.”

However, not all of the US data was rosy yesterday, which sent the dollar falling and allowed oil to gain ground. The greenback fell after US durable goods orders unexpectedly slid in September, while a separate report showed house prices in 20 US cities rose less than expected both on monthly and annual basis.

Price outlook

Bearish sentiment persisted after Goldman Sachs followed other banks and slashed its price forecasts for both WTI and Brent on Sunday, citing a supply glut next year.

The investment bank cut its WTI price forecast for the first quarter of 2015 by $15 to $75 per barrel, while also trimming its prediction for Brent by the same amount to $85. Goldman expects WTI to drop to as much as $70 in the three months through June 2015 and its European counterpart to touch $80 as the oversupply is projected to be most pronounced then.

OPEC members, which supply around 40% of the world’s oil, will convene in Vienna on November 27th to discuss the group’s production policy and decide on a possible cut in production. However, OPEC’s biggest producers, including Saudi Arabia, have signaled their reluctance to cut output and instead reduced prices to buyers.

Investors across the globe awaited the conclusion of FOMCs seventh meeting this year, broadly expected to bring Feds unprecedented bond-buying program to an end. However, policy makers have previously stressed out that they are in no hurry to begin raising interest rates as a strong dollar and weaker global economic growth posed risks to the US economys recovery. Market players will focus on FOMCs after-meeting statement for clues of an interest rate hike timetable, as well as the Federal Reserves opinion regarding the global economys state.

Pivot points

According to Binary Tribune’s daily analysis, West Texas Intermediate December futures’ central pivot point is at $81.15. In case the contract breaches the first resistance level at $81.93, it may rise to $82.45. Should the second key resistance be broken, the US benchmark may attempt to advance $83.23.

If the contract manages to breach the first key support at $80.63, it might come to test $79.85. With this second key support broken, movement to the downside could continue to $79.33.

Meanwhile, December Brent’s central pivot point is projected at $85.83. The contract will see its first resistance level at $86.58. If breached, it may rise and test $87.13. In case the second key resistance is broken, the European crude benchmark may attempt to advance $87.88.

If Brent manages to penetrate the first key support at $85.28, it could continue down to test $84.53. With the second support broken, downside movement may extend to $83.98 per barrel.