Crude oil trading outlook: futures slide amid ample supply, solid dollar

Both West Texas Intermediate and Brent benchmark crudes fell on Thursday after rising on Wednesday as ample global supply offset some output concerns from the Middle East and overall upbeat inventory data from the US. A strong US dollar kept dragging on the market.

December US crude fell 0.95% to $77.93 per barrel by 13:46 GMT, having shifted in a daily range of $78.98-$77.61 a barrel. Prices rose 1.93% on Wednesday to $78.68, rebounding from Tuesdays three-year low of $75.84 a barrel.

Meanwhile on the ICE, Brent for delivery in the same month slid 0.70% to $82.37 a barrel, having varied between $83.27 and $82.12 during the day. The contract rose 0.16% to $82.95 a barrel yesterday, having earlier fallen to a four-year low of $81.63. Brents premium to its US counterpart narrowed to $4.44 from Wednesdays close of $4.69.

The oil market drew some support yesterday after the EIA released overall bullish US supply data and as Libyas biggest oilfield was shut down following an attack.

US crude oil stockpiles rose by 0.46 million barrels in the seven days through October 31st to 380.2 million barrels. Although this was the fifth straight weekly increase, it outperformed analysts’ projections for a jump of 2.35 million barrels. Supplies at Cushing, Oklahoma, the biggest US storage hub and delivery point for NYMEX-traded contracts, slid by 551 000 barrels to 20.8 million.

US crude production inched up to 8.972 million barrels per day, up from 8.970 million bpd a week earlier, which was the highest since at least January 1983. US crude imports slid to 6.675 million bpd last week from 7.101 million during the previous seven days. Over the last four weeks, crude oil imports averaged 7.248 million barrels per day, 4.4% below the same four-week period last year.

Refinery utilization rate picked up to 88.4% from 86.6% a week earlier. Both motor gasoline and distillate fuel output increased and averaged 9.7 million and 4.6 million barrels per day, respectively.

Kang Yoo Jin, a commodities analyst at Woori Investment & Securities Co. in Seoul, said for Bloomberg: “This is a turning point for U.S. crude stockpiles to expand less and start to drop as refiners increase their operating rates to meet heating demand in the winter.”

Motor gasoline inventories fell by 1.4 million barrels to 201.8 million, exceeding analysts’ expectations for a 0.6-million decline. Distillate fuel stockpiles, which include diesel and heating oil, decreased by 0.7 million barrels to 119.7 million, compared to an anticipated 2.2-million-bpd drop.

Supply concerns

Temporary support was also drawn after Libyas output slid by a third following the shutdown of the African countrys biggest oilfield. Output at El Sharara was halted after gunmen attacked the on-site production compound but they were reported to have left after stealing cars. Libya, holder of Africas biggest crude reserves, hopes to reopen the field very soon, said Mansur Abdallah, director of oil movement at the Zawiya refinery and oil port, cited by Bloomberg.

The market also bounced briefly following rumors of a pipeline explosion in Saudi Arabia, which however turned out to be a quickly distinguished fire at a diesel pipeline.

Meanwhile, US Secretary of State John Kerry said yesterday that a permanent to deal to curb Irans nuclear program will be harder to achieve after a November 24 deadline expires, sounding a note of urgency ahead of scheduled talks in Oman next week.

A possible lift of sanctions against the Persian Gulf nation could add a capacity of as much as 500 000 barrel per day to the global oil markets next year, worsening the already concerning supply-demand imbalance.

A strong dollar also continued to weigh on the market. The US dollar index for settlement in December stood at 87.915 at 13:42 GMT, having earlier risen to 88.020, the highest since June 2010. The US currency gauge rose 0.55% on Wednesday to 87.567.

Pivot points

According to Binary Tribune’s daily analysis, West Texas Intermediate December futures’ central pivot point is at $78.16. In case the contract breaches the first resistance level at $79.87, it may rise to $81.05. Should the second key resistance be broken, the US benchmark may attempt to advance $82.76.

If the contract manages to breach the first key support $76.98, it might come to test $75.27. With this second key support broken, movement to the downside could continue to $74.09.

Meanwhile, December Brent’s central pivot point is projected at $83.01. The contract will see its first resistance level at $84.39. If breached, it may rise and test $85.83. In case the second key resistance is broken, the European crude benchmark may attempt to advance $87.21.

If Brent manages to penetrate the first key support at $81.57, it could continue down to test $80.19. With the second support broken, downside movement may extend to $78.75 per barrel.