Crude oil trading outlook: futures extend rebound on Saudi comments

West Texas Intermediate and Brent crude rose for a second day as Saudi Arabia comments for a rebound in oil prices boosted sentiment, leading to general consensus the market will retain its current level through the end of the year.

US crude for delivery in February stood 0.51% higher at $57.42 per barrel at 9:54 GMT, having shifted in a daily range of $58.53-$56.72. The contract surged 5.10% on Friday to $57.13.

Meanwhile on the ICE, Brent for settlement in the same month traded at $61.80 a barrel, up 0.68% on the day. Prices ranged between a daily high of $62.97 and $61.26. The European benchmark crude rose 3.56% on Friday to $61.38, settling at a premium to WTI of $4.25. The gap widened to $4.38 on Monday.

Saudi Arabian Oil Minister Ali Al-Naimi said that the global supply glut that recently drove oil prices to the lowest in 5-1/2 years was created by the lack of cooperation from non-OPEC producers. The group will probably refrain from cutting output, even if non-member producers offer to pump less, Al-Naimi said, and expressed confidence that oil will rebound as reviving global economic growth will spur demand.

According to Mohammed Al Sada, Qatar’s energy minister, the market suffers from an excess supply of 2 million barrels per day. Oil prices have fallen more than 40% since a June peak amid concerns that a weaker global economy would not induce enough demand to absorb rising global supplies.

The market has fallen some 20% after the Organization of the Petroleum Exporting Countries resisted calls to cut its collective output at a November 27 meeting and reaffirmed its previous production quota. This comes at a time of ever-growing US crude output, with the Energy Information Administration having reported that US producers pumped 9.137 million barrels of crude per day in the week ended December 12th, the highest on weekly data started in January 1983.

Recurring signs of economic fatigue in China, coupled with dismal growth in Europe, are likely to cap any major rebounds in oil prices.

ANZ said in a report, cited by CNBC: “An oversupplied market is likely to keep crude oil prices under pressure in the first half of 2015, while demand struggles to recover in Asia.”

National Australia Bank expects Brent and WTI to average $68 and $64 per barrel in 2015, respectively. “Given the lead time in permit approval and rig construction ahead of oil production, a sizeable negative U.S. supply response given the price drop is unlikely to take place until late 2015, which places further downward pressure on oil prices in the first six months of next year” it said.

US supplies

Data by the Energy Information Administration showed on Wednesday that US crude oil inventories fell by 0.847 million barrels in the week ended December 12th, while supplies at the Cusihng, Oklahoma storage hub surged by 2.92 million barrels to 27.8 million, the highest since March.

Total motor gasoline inventories surged by 5.250 million barrels last week to 222.0 million, exceeding analysts’ projections for a jump to 1.780 million. Distillate fuel supplies declined by 0.207 million barrels to 121.5 million, beating estimates for a 0.340-million jump.

Pivot points

According to Binary Tribune’s daily analysis, West Texas Intermediate February futures’ central pivot point is at $56.66. In case the contract breaches the first resistance level at $58.89, it may rise to $60.66. Should the second key resistance be broken, the US benchmark may attempt to advance $62.89.

If the contract manages to breach the first key support at $54.89, it might come to test $52.66. With this second support broken, movement to the downside could continue to $50.89.

Meanwhile, February Brent’s central pivot point is projected at $61.03. The contract will see its first resistance level at $63.01. If breached, it may rise and test $64.64. In case the second key resistance is broken, the European crude benchmark may attempt to advance $66.62.

If Brent manages to penetrate the S1 level at $59.40, it could continue down to test $57.42. With the second support broken, downside movement may extend to $55.79 per barrel.