Crude oil trading outlook: futures steady on OPEC speculations, economic data in focus

West Texas Intermediate traded below $75 a barrel after US crude inventories rose more than expected last week, while Brent hovered around $78 amid growing speculations OPEC may scale back its collective output. Disappointing China data and a strong dollar weighed on the oil segment.

January US crude was up 0.17% at $74.63 at 8:22 GMT, having shifted in a daily range of $74.78-$74.25. The US benchmark crude fell 0.19% on Wednesday to $74.50, a third straight daily decline.

Meanwhile on the ICE, Brent for delivery in the same month rose 0.01% to $78.11 and ranged between $78.37 and $77.91 during the day. The contract fell 0.47% on Wednesday to $78.10, settling at a premium of $3.60 to its US counterpart. The gap narrowed to $3.48 on Thursday.

The Energy Information Administration reported yesterday that US crude oil supplies rose by 2.608 million barrels to 381.1 million in the seven days ended November 14th, exceeding analysts’ projections for a jump of between 0.8 million and 1.5 million barrels. Stockpiles at the Cushing, Oklahoma, oil hub rose by 0.718 million barrels to 23.2 million.

Domestic crude output inched lower to 9.004 million barrels per day, compared to 9.063 million bpd a week earlier, which was the largest on record for weekly data. Refinery utilization picked up to 91.2% from 90.1% during the previous week.

Total motor gasoline inventories rose by 1.034 million barrels last week to 204.6 million, exceeding expectations for a 0.6-million jump. Distillate fuel stockpiles, which include diesel and heating oil, slid 2.056 million barrels to 114.8 million, compared to forecasts for a 1.880-million drop.

OPEC expectations

The markets main driving force, however, remained ambivalent expectations for the outcome of OPECs November 27 meeting in Vienna. The oil cartels leading producers have signaled their reluctance to cut output and lose market share, mainly to US shale producers, but smaller members have called for measures to address the recent months price rout.

Last couple of weeks saw intensifying diplomatic activity by OPEC members, and Russia as well, as the interested parties discussed steps to guide the market back higher.

Samir Kamal, Libyas OPEC governor and head of planning at the Libyan oil ministry, said that the group should cut excess supply and also reduce its output target. This would mean members should pump between 250 000 and 600 000 barrels of crude oil per day.

He said that the upcoming meeting in Vienna will result in the group scaling back output to its own target of 30 million barrels per day, which was first agreed on January 12th. Compliance to the target level is a “minimum wish,” Kamal stated.

Meanwhile, Venezuelan President Nicolas Maduro said that an oil price of around $100 is “fair” and that his country will continue to work on addressing falling prices with international partners.

China manufacturing

Falling activity in Chinas manufacturing sector and a strong US dollar also weighed on the market. Preliminary private data showed that Chinas manufacturing sector was at the threshold between expansion and contraction.

The corresponding HSBC Flash China Manufacturing PMI fell to a six-month low of 50.0 in November, compared to Octobers final reading of 50.4, underperforming projections for 50.3. The output sub-index declined to a seven-month low of 49.5, entering contraction territory, compared to 50.7 in October. New orders increased at a faster rate, but unemployment also increased, at a faster rate, while export orders rose, but at a slower rate.

Hongbin Qu, Chief Economist, China & CoHead of Asian Economic Research at HSBC commented on the report: “Disinflationary pressures remain strong and the labour market showed further signs of weakening. Weak price pressures and low capacity utilization point to insufficient demand in the economy. Furthermore, we still see uncertainties in the months ahead from the property market and on the export front. We think growth still faces significant downward pressures, and more monetary and fiscal easing measures should be deployed.”

Speculations for the implementation of additional stimulus measures in China, as well as in Europe and Japan lent the market some support and market players eyed a slew of economic data from Europe and the United States later on Thursday and Friday.

The Labor Department is expected to report at 13:30 GMT that consumer prices fell in October from a month earlier. The report is likely to show a 0.1% deflation on a monthly basis, while the CPI index probably slowed down to an annualized 1.6% last month, compared to 1.7% in September. Also due later today are initial jobless claims, existing home sales, Markit Economics Manufacturing PMI, as well as manufacturing activity in the region of Philadelphia.

Minutes from Feds October 28-29 meeting showed yesterday that some policy makers remained cautious about the possibility of prices not rising fast enough, even though key labor market gauges are showing a robust improvement.

A record of the meeting showed that many participants observed the committee “should remain attentive to evidence of a possible downward shift in longer-term inflation expectations. Some of them noted that if such an outcome occurred, it would be even more worrisome if growth faltered.”

Pivot points

According to Binary Tribune’s daily analysis, West Texas Intermediate January futures’ central pivot point is at $74.61. In case the contract breaches the first resistance level at $75.31, it may rise to $76.11. Should the second key resistance be broken, the US benchmark may attempt to advance $76.81.

If the contract manages to breach the first key support $73.81, it might come to test $73.11. With this second key support broken, movement to the downside could continue to $72.31.

Meanwhile, January Brent’s central pivot point is projected at $78.53. The contract will see its first resistance level at $79.02. If breached, it may rise and test $79.94. In case the second key resistance is broken, the European crude benchmark may attempt to advance $80.43.

If Brent manages to penetrate the first key support at $77.61, it could continue down to test $77.12. With the second support broken, downside movement may extend to $76.20` per barrel.