West Texas Intermediate and Brent crude rose on Friday as investors weighed supply disruptions in Libya and Iraq versus the prospects of a stronger dollar ahead of todays expected strong US employment numbers.
US crude for delivery in April traded 0.83% higher at $51.18 per barrel at 8:50 GMT, shifting in a daily range of $51.22-$50.81. The contract slid 1.5% on Thursday to $50.76 a barrel and is up 2.9% for the week so far.
Meanwhile on the ICE, Brent for settlement in the same month was up 1.22% at $61.22 a barrel, having ranged between $61.30 and $60.68 during the day. The European benchmark crude fell 0.1% yesterday to $60.48, widening its premium to WTI to $9.72 from $9.02 on Wednesday. The gap grew to $10.04 on Friday.
The oil market, and particularly Brent, drew support as Islamic State militants lit up oil wells in Tikrit, Iraq, to impede the advance of Iraqi soldiers and Shiite militiamen, fanning concerns of a destabilization in supply from Iraq, OPECs second-biggest producer.
Similar fears from Libya also kept the market underpinned as the country, holder of Africas biggest crude reserves, faced escalating security issues as factions battle over political and oil wealth control. The state-run National Oil Corporation declared earlier this week force majeure on 11 oilfields, with nationwide output running at 400 000 barrels per day, a fraction of presumed total capacity of about 1.5 million bpd.
Oil prices also drew support earlier in the week as Iran’s ambassador to the International Atomic Energy Agency said on Wednesday that no deal had been reached with world powers on curbing the Islamic Republics nuclear program, offsetting a markedly bearish inventory report by the EIA.
Investors kept a close eye on ongoing nuclear talks with Iran as any sign of a definitive deal would lift US-imposed sanctions on Tehran, including a curb on its oil exports, which would allow for the return of what some analysts estimate more than 1 million bpd of crude on the global market.
Also under the spotlight, Baker Hughes Inc. will report later on Friday on the number of active US oil rigs, which last week fell for a 12th straight week to the lowest level since June 2011, reflecting US producers adjustment to falling crude prices.
Oil fell by almost 50% last year and further slumped to a six-year low in late-January as US crude oil production jumped to the highest in more than three decades, while OPEC denied any obligation to cut its own output in order to normalize the market for all producers.
Data by the EIA showed on Wednesday that US crude oil inventories jumped by 10.303 million barrels in the week ended February 27th to 444.4 million, the most in at least 80 years. Analysts had projected a jump of little over 4 million barrels. US crude oil output rose by 39 000 barrels per day to 9.324 million bpd, the highest since 1972, while refinery utilization rates slid to 86.6% from 87.4% the previous week.
Economic recovery
Market players eyed todays all-important US employment data for further trading cues after Wednesdays ADP employment change came in worse-than-expected, although still registering solid job growth above 200 000, while yesterdays initial jobless claims showed more Americans than expected filed for initial jobless benefits last week.
US non-farm employers are projected to have added 240 000 jobs in February after creating 257 000 the previous month, while the unemployment rate likely inched back down to 5.6% from 5.7% in January. Confirmation of the expected readings, or a better showing, would back the case of a sooner interest rate hike by the Federal Reserve, providing robust support for the US dollar and weighing on dollar-denominated commodities.
A gauge measuring the greenbacks strength against six major peers rose yesterday to the highest in more than 11 years. However, strong employment figures also support oil on the demand side.
Fanning optimism about oil demand outlook in Europe, Germanys industrial output expanded at a better rate than expected in January from a month earlier, registering the fifth straight monthly expansion, while Decembers reading was revised up to show a growth of 1% compared to the initial estimate of 0.1%.
Industrial output in Spain also expanded in January, by an annualized 0.4%, compared to a 0.9% contraction in December.
Due at 10:00 GMT on Friday are fourth-quarter Eurozone GDP growth figures, expected to show a 0.9% annualized pace of expansion.
The European Central Bank kept yesterday its benchmark interest rate unchanged at 0.05%, as expected, and raised its euro-area growth forecast for 2015 to 1.5% from 1% previously. The quantitative easing program, which it announced in January, will start next week.
ECB President Mario Draghi said the stimulus measure will inject at least €1.1 trillion into the Eurozone economy by purchasing €60bn of assets per month through September 2016 and projected economic growth will slowly edge up to 2.1% by 2017.
Pivot points
According to Binary Tribune’s daily analysis, West Texas Intermediate April futures’ central pivot point is at $51.26. In case the contract breaches the first resistance level at $51.90, it may rise to $53.05. Should the second key resistance be broken, the US benchmark may attempt to advance $53.69.
If the contract manages to breach the first key support at $50.11, it might come to test $49.47. With this second support broken, movement to the downside could continue to $48.32.
Meanwhile, April Brent’s central pivot point is projected at $60.71. The contract will see its first resistance level at $61.34. If breached, it may rise and test $62.20. In case the second key resistance is broken, the European crude benchmark may attempt to advance $61.34.
If Brent manages to penetrate the S1 level at $59.85, it could continue down to test $59.22. With the second support broken, downside movement may extend to $58.36 per barrel.
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