Crude oil trading outlook: futures extend slide ahead of US inventory data, Iran talks

West Texas Intermediate crude fell for a sixth day on Tuesday ahead of US supply data that is expected to show a tenth consecutive jump in US crude stockpiles to a new record. Brent slid for a fourth session.

US crude for delivery in May traded 0.82% lower at $45.75 per barrel at 8:14 GMT, shifting in a daily range of $46.24-$45.71. The contract tumbled nearly 2% on Monday to $46.13 a barrel, having earlier fallen to a six-year low of $45.08. The April contract expires on March 20th.

Meanwhile on the ICE, Brent for settlement in the same month slid 0.63% to $53.60 a barrel, ranging between $54.38 and $53.53 for the day. The European crude benchmark slid 1.95% on Monday to $53.94 after it earlier dropped to a six-week low of $52.65. Brent traded at a premium of $7.85 to its US counterpart, up from Mondays close at $7.81.

Wednesdays inventory report by the Energy Information Administration is expected by analysts to reveal a 3.5-million-barrel jump in stockpiles for the week ended March 13th, a tenth straight weekly jump. If confirmed, this would bring inventories to 452.4 million barrels, the highest in at least 80 years. Both motor gasoline and distillate fuel supplies are projected to have declined, by 1.80 and 1.83 million barrels respectively, after missing estimates last week.

The EIA said last Wednesday that US crude production rose by 42 000 barrels per day to 9.366 million bpd, the highest on weekly data stretching back to January 1983. US output has continuously revisited its peak over the last few months despite a steep drop in the number of active US rigs targeting oil as the biggest and higher-yielding shale wells continue to operate.

Baker Hughes Inc. said on Friday that US oil explorers idled 56 rigs last week, cutting their number for a 14th straight week to 866, the lowest since March 25th, 2011. Producers have brought offline 709 rigs since early-December as a slump in oil prices that began in June forced spending cuts and layoffs by the thousands.

Industry group the American Petroleum Institute will release its separate private data at 20:30 GMT on Tuesday.

“We expect WTI to remain under pressure as inventories swell further as the seasonal maintenance period begins,” ANZ bank said, cited by CNBC. “We expect this to remain the case in the short term.”

A strong US dollar also kept the oil market pressured, although the greenback eased from recent 12-year highs against a basket of six major currencies. However, more upside might be expected as Federal Reserve officials convene on Tuesday and Wednesday and are broadly expected to remove their “patient” stance regarding the timetable for an interest rate hike, given Februarys strong jobs data. Hawkish comments would further boost the greenback, weighing on dollar-denominated commodities.

The US dollar index for settlement in June traded 0.11% lower at 99.935 at 8:26 GMT, having ranged between 100.265 and 99.785 for the day. The contract slid 0.67% yesterday to 100.041, easing from Fridays 12-year high of 100.785. A stronger greenback makes dollar-denominated raw materials pricier for foreign currency holders and curbs their appeal as an alternative investment.

Market players also eyed how talks between Iran and major world powers will develop. Signs of a possible breakthrough were given as the US and European powers showed willingness to compromise on suspending UN sanctions. Diplomats from the US and Iran resumed talks on Monday in Lausanne, Switzerland, with an aim to reach a preliminary deal by the end of March and a possible final accord by June.

A deal would lift tough sanctions that have battered Irans economy, including a cap on the Islamic Republics crude oil exports. Iran could boost outbound shipments by as much as 1 million barrels per day, were the curb removed, Oil Minister Bijan Namdar Zanganeh said. The Persian Gulf nation exported 1.2 million barrels per day of oil in February, according to the IEA.

Pivot points

According to Binary Tribune’s daily analysis, WTI May futures’ central pivot point is at $46.16. In case the contract breaches the first resistance level at $47.25, it may rise to $48.36. Should the second key resistance be broken, the US benchmark may attempt to advance $49.45.

If the contract manages to breach the first key support at $45.05, it might come to test $43.96. With this second key support broken, movement to the downside could continue to $42.85.

Meanwhile, May Brent’s central pivot point is projected at $53.87. The contract will see its first resistance level at $55.08. If breached, it may rise and test $56.23. In case the second key resistance is broken, the European crude benchmark may attempt to advance $57.44.

If Brent penetrates the first key support at $52.72, it could continue down to test $51.51. With the second support broken, downside movement may extend to $50.36 per barrel.