Crude oil trading outlook: WTI futures little changed after China data, Ukraine tension

Both West Texas Intermediate and Brent crude benchmarks were little changed in early European trading on Wednesday as investors weighed Chinese data pointing to a feared economic slowdown against rising tensions in eastern Ukraine. Private data showing a larger-than-expected jump in US crude supplies last week, coupled with prospects of rising Libyan exports also pressured the market, but signs of robust economic recovery in the United States provided strong support.

On the New York Mercantile Exchange, WTI crude for delivery in May traded at $103.90 per barrel at 07:13 GMT, up 0.14% on the day. Prices shifted in a narrow daily range between $103.98 and $103.68 per barrel. The American benchmark crude lost 0.3% on Tuesday to close the session at $103.75 a barrel.

Meanwhile on the ICE, Brent futures for settlement in June stood at $109.26 a barrel, down 0.09% on the day. Prices ranged between days high and low of $109.47 and $109.00 a barrel respectively. The contract added 0.27% on Tuesday and settled at $109.36. Brents premium to WTI for delivery in the same month narrowed to $6.17, down from Tuesdays close at $6.36.

Oil prices were pressured on Wednesday after overall downbeat economic data from China confirmed fears the worlds second-largest economy cooled off in the first quarter, fueling concerns it might miss the governments official 2014 target.

Chinas National Bureau of Statistics reported early on Wednesday that the countrys Gross Domestic Product (GDP) rose by an annualized 7.4% rate in the three months through March, the slowest in six quarters. Albeit beating analysts expectations for a slowdown to 7.3%, the reading trailed Q4s 7.7% growth and was below the governments targeted 7.5% expansion. Quarter-on-quarter, the Asian economy matched projections and grew by 1.4%, below the preceding periods 1.8% growth.

Also fanning negative sentiment, Chinas industrial output fell short of expectations and registered at 8.8% on annual basis, compared to anticipations for a 9.0% expansion. Retail sales partially offset the bad news by rising by an annualized 12.2% pace, compared to expectations for a 12.1% jump from Februarys 11.8%.

Michael McCarthy, chief strategist at CMC Markets, said for CNBC, referring to the industrial production data: “A lot of China watchers have been focused on the idea that the February number was distorted by the Chinese New Year holidays and were looking for the March data to confirm that was the case. But that hasnt come through. Its not necessarily a negative for oil but its not providing the support that was anticipated.”

US crude supplies

The oil complex was also pushed down after the industry-funded American Petroleum Institute reported on Tuesday that US crude supplies rose by 7.64 million barrels last week, much more than expected, while gasoline supplies fell by 0.499 million barrels, less than projected. Distillate fuel inventories slid by 1.11 million.

Market players are awaiting the upcoming release of government data to assess demand prospects in the worlds top consumer. According to a Bloomberg survey of analysts ahead of EIAs report, US crude inventories are expected to have jumped by 1.75 million barrels to 385.9 million in the seven days through April 11th, a 12th weekly jump in 13. Motor gasoline supplies are forecast to have declined by 1.75 million barrels, while distillate inventories were probably unchanged.

However, overall upbeat data from the US on Tuesday supported the view the worlds largest economy has overcome a tough winter that had suppressed its economic activity. Consumer inflation accelerated in March, showing a pick up in activity, but still remained below Feds long-term target, limiting fears for an earlier-than-expected interest rate hike.

Market players are now awaiting the release of other key economic data from the US to gauge the strength of the economy, including housing data, initial jobless claims and Philadelphia region manufacturing gauge.

On Wednesday, data is expected to show a rise in housing starts in March and a minor decline in the issuance of building permits. A separate report will likely show a second straight monthly expansion in industrial production, by 0.5%, after activity in the sector contracted by 0.3% in January.

Due on Thursday are weekly initial unemployment claims and the Philadelphia Fed Manufacturing Index, which is expected to have marked a second straight month of expansion.

Also bearish for oil, Libyas state-run National Oil Corporation said that a tanker prepared to ship 1 million barrels of crude oil from the Hariga port, its first loading since control over the port was handed back to the government. Hariga is one of the four eastern ports that were supposed to be surrendered back to the government under an agreement reached on April 6th.

A NOC spokesman said that Zueitina, the other port that was agreed to reopen, was still not under government control. The other two larger ports, Ras Lanuf and Es Sider, are supposed to be surrendered after more negotiations. Es Sider, the country’s largest port, has a daily capacity of 340 000 bpd, while Ras Lanuf can ship 220 000 barrels per day.

Ukraine crisis

The market however continued to draw support by escalating tensions in eastern Ukraine. Ukrainian forces launched an operation on Tuesday against pro-Russia separatists in the Russian-speaking East, but, aside airborne troops landing, action was limited.

Meanwhile, the European Union sought on Tuesday ways to limit its dependence on Russian gas deliveries and help supply Ukraine. The EU agreed on Monday to expand the list of people sanctioned due to their alleged participation in the violation of Ukraine’s sovereign integrity by 4 to 55. Further penalties may be considered as well.

Technical view

According to Binary Tribune’s daily analysis, in case WTI May crude manages to breach the first resistance level at $104.23, it will probably continue up to test $104.71. In case the second key resistance is broken, the US benchmark will probably attempt to advance to $105.37.

If the contract manages to breach the first key support at $103.09, it will probably continue to slide and test $102.43. With this second key support broken, the movement to the downside will probably continue to $101.95.

Meanwhile, Brent will see its first resistance level at $109.96. If breached, it will probably rise and test $110.57. In case the second key resistance is broken, the European crude benchmark will probably attempt to advance to $111.38.

If Brent manages to penetrate the first key support at $108.54, it will likely continued down to test $107.72. With the second support broken, downside movement may continue to $107.12 per barrel.