Crude oil trading outlook: futures drop after gains on Ukraine, US crude supplies cap bullish sentiment

During early European trading hours West Texas Intermediate and Brent both lost some of the gains from last session, when a sharp escalation of the tone on the Ukraine crisis prompted Russian President Vladimir Putin to warn of “consequences”, after killings of pro-Russian separatists. The crude supplies report from US is set to keep bearish pressure on prices.

West Texas Intermediate futures for settlement in June traded for $101.63 per barrel at 7:23 GMT, losing 0.30% for the session so far on the New York Mercantile Exchange. Daily high and low stood at $102.05 and $101.59, respectively. Over the last three trading days the US crude benchmark lost 1.64%, though yesterday it added 0.49%.

At the same time, Brent futures for June delivery registered a 0.18% loss to trade for $110.13 per barrel on the ICE at 7:23 GMT, with prices ranging from $110.10 to $110.53 per barrel. Brents premium to WTI stood at $8.50. Yesterday, the European benchmark closed with a gain of 1.12%, after the crisis in Eastern Europe heated-up, to settle at $110.33 per barrel, the highest closing price since early March.

The heating of tensions in Ukraine is the strongest force behind crude gains yesterday. The interim government reported that security forces had killed at least two pro-Russian separatists, prompting Russian president Vladimir Putin to warn the pro-western authorities in Kiev that they will face “consequences” if the military uses arms against its own people. A Russian TV station quoted Vitaly Churkin, Moscows ambassador to the UN, as saying that Russia would have legal basis to send “peacekeepers” to Ukraine.

Meanwhile, the Kremlin urged the US to use its influence to persuade the Ukrainian government to stop its crackdown on the eastern separatists, while the US accused Moscow of inciting the unrest. US Secretary of State John Kerry, said: “Not a single Russian official has publicly gone on television in Ukraine and called on the separatists to support the Geneva agreement.” He added that US intelligence was certain Russia was “playing an active role in destabilizing eastern Ukraine with personnel, weapons, money and operational planning,” the BBC reported.

Yesterday the UK said that Russian aircraft were detected approaching northern Scotland, and the Netherlands, Denmark and the United Kingdom all sent jets to escort the approaching aircraft away from their airspace.

Elsewhere, data confirming the strong recovery of the US economy was revealed yesterday, as durable goods orders for the month of March beat expectations to score a 2.6% growth from a month before – the biggest gain since November, and well-ahead of a 2.0% expectation. Core durable goods orders added 2.0% to February’s reading, beating forecasts of a 0.6% rise. Last week saw major economic indicators such as retail sales, consumer inflation and industrial output all score results better than expected, boosting economic outlooks for the US, ahead of a quarterly growth report next week, projected to show continuing growth for the worlds top oil consumer.

Earlier, Wednesday saw a bearish report on crude supplies in the States pressure oil prices, as the Energy Information Administration reported inventories in the US were at their highest level on record. Supplies rose by 3.524 million barrels in the week through April 18th, to reach 397.7 million, exceeding expectations of a 2.3-million barrels increase. Crude imports and domestic production outpaced refinery utilization rate, even though it also picked-up pace, to score 91.0%, up from last week’s 88.8%.

Motor gasoline and distillates figures also fanned significantly negative sentiment, with gasoline inventories having dropped by 0.274 million barrels for the week, far below expectations of a 1.713-million decline, while distillate fuels gained 0.597 million barrels in supplies, in contrast to a forecast of a 0.463-million decline.

“There’s a huge amount of crude in the U.S., which should keep a lid on prices. Any rally will soon come under pressure.” said for Bloomberg Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut.

Technical view

According to Binary Tribune’s daily analysis, in case WTI June crude manages to breach the first resistance level at $102.39, it will probably continue up to test $102.85. In case the second key resistance is broken, the US benchmark will probably attempt to advance to $103.34.

If the contract manages to breach the first key support at $101.44, it will probably continue to slide and test $100.95. With this second key support broken, the movement to the downside will probably continue to $100.49.

Meanwhile, Brent will see its first resistance level at $110.96. If breached, it will probably rise and test $111.60. In case the second key resistance is broken, the European crude benchmark will probably attempt to advance to $112.54.

If Brent manages to penetrate the first key support at $109.38, it will likely continue down to test $108.44. With the second support broken, downside movement may extend to $107.80 per barrel.