Crude oil weekly recap, May 19 – May 23

WTI and Brent futures recorded sizable gains this week. Contracts drew foremost support from the big drop in US crude oil stockpiles, while further confidence was gained through a number of positive reports from top-consumers US and China. On a different note, developments in Ukraine and Libya kept fears over supplies very real, maintaining a floor under prices. Kiev is holding presidential elections today, in hopes of easing tensions.

West Texas Intermediate futures for settlement in July closed for $104.35 per barrel on Friday on the New York Mercantile Exchange, up 0.59% for the day, and 2.71% for the week, capitalizing on major support from US supplies draws. Weekly high and low stood at, respectively, $104.50 per barrel on Friday, which was the highest price in a month , and $101.52 per barrel on Monday.

Meanwhile on the ICE in London, Brent futures due in July recorded a 0.16% daily gain to close for $110.54 per barrel on Friday. The tally for the week is a 0.71% increase. Brent’s premium to WTI stood at $6.19, narrowing last weeks closing margin of $8.17. Weekly high and low were at, respectively, $111.04 per barrel on Thursday, recording the highest level since early March, and $109.10 per barrel on Tuesday.

“I find $104 WTI a bit preposterous given how ample supplies are but I wouldn’t recommend standing in the way of this,” said for Bloomberg Stephen Schork, president of the Schork Group Inc. in Villanova, Pennsylvania. “There’s still ample crude.”

US stockpiles

The weekly Energy Information Administration report on oil inventories in the US for the week ended May 16 was released on Wednesday. Crude oil supplies were shown to stand at 391.3 million barrels, recording a 7.226 million barrel decrease from last week, when stocks had grown by 947 000 barrels. On Tuesday the private American Petroleum Institute (API) suggested a 10 million barrel decline in inventories. A Bloomberg survey expected stockpiles to stand as they were, while a Reuters poll projected a 1 million increase.

Domestic production was reported at 8.434 million barrels per day (bpd), adding 6 000 bpd on the previous standing. Last week domestic output had grown by a further 78 000 bpd. Imports declined by 658 000 bpd to record 6.469 million bpd. Last week imports had grown by 242 000 bpd.

Supplies at Cushing, Oklahoma, the delivery point for WTI, were at 23.2 million barrels, dropping a further 200 000 from last week, when they had declined by 0.6 million. Meanwhile, crude in storage at PADD3, which is the Gulf Coast, were at 210.0 million, dropping 5.7 million since last week’s report, when hubs at the Coast had added 2.3 million barrels.

“The drop in Gulf Coast supplies was a major catalyst,” said for Bloomberg Amrita Sen, chief oil market strategist at Energy Aspects Ltd. in London. “Earlier, when Cushing was drawing, Gulf Coast stocks were at a record and expectations were for crude to back up to Cushing. This time USGC drew too.”

Motor gasoline supplies stood at 213.4 million barrels, which is a growth of 0.970 million since the previous report, while the API reported a 135 000 gain on Tuesday. Last week a 0.772 million decline was recorded. Distillates inventories grew by 3.399 million to stand at 116.3 million, while API suggested a 1.360 million increase. Last week distillates lost 1.124 million barrels.

Refinery utilization rate logged at 88.7%, which is a slight decrease from the previous reading of 88.8%. Gasoline production averaged 9.592 million barrels per day, down 14 000 bpd since last week, when a 614 000 bpd increase had been recorded. Gasoline inventories added, mainly, due to the increase in imports, which were at 997 000 bpd , up 120 000 on the previous reading. Distillates production was at 5.002 million bpd, which is a weekly growth of 91 000. Last week distillates production slowed by 128 000 bpd. Meanwhile, imports of distillate fuels averaged 176 000 bpd, after logging 100 000 last week.

The report next week will be released on Thursday, due to the holiday on Monday in the US.

Economic data

Crude oil contracts were further supported by a number of positive economic reports from the US and China, which consume a combined 32% of all oil.

China’s manufacturing PMI for May was announced by HSBC and Markit early on Thursday. The preliminary data put the figure at 49.7, well above expectations of 48.1, though still below the 50.0 contraction/expansion mark. April had recorded a significant slowdown in factory activity, with HSBC logging 48.1.

“The PMI almost came as a surprise because data released two weeks ago weakened our expectation that the Chinese economy will soon recover,” said for Bloomberg Hong Sung Ki, senior analyst at Samsung Futures Inc. “It’s meaningful that the number has reached close to 50, which gives a positive outlook for oil prices.”

The US also logged manufacturing PMI for May. The reading at 56.2 stood well-above expectations, while existing home sales in April also added, but less than expected, for a 1.3% monthly gain. New homes sales for April gained significantly, adding 6.4% on an upward-revised 407 000 deals in March.

Earlier, the Federal Reserve released minutes from its April meeting on Wednesday, further boosting sentiment for the US. The protocol revealed that monetary policy makers had begun laying the groundwork for the eventual discontinuation of easing. However, they remained firm in the short-to-mid term, saying that inflation and employment have not yet entered a conflicting phase, which means the full support of the Fed will remain in place in the foreseeable future.

Ukraine, Libya

Ukraine is holding the presidential election today. Kiev hopes the vote will soften the conflict, though the eastern rebels have long since declared they will boycott the vote, and will try to incorporate the separatist regions in the Russian Federation.

Previously, Ostap Cherniy, a militia spokesman, said early on Saturday that the recent deadly attacks on the Ukrainian military were carried-out by the ultra-nationalist Right Sector, in response to dissent and talk of desertion amongst the troops, Russian news agency ITAR TASS reported.

Ukraine’s military experienced the deadliest attack on its troops early on Wednesday. At least 14 soldiers were killed and a reported two dozen injured. Ukrainian officers told the BBC that the attack was carried out by mercenaries, and not the separatists.

Elsewhere, Libya is also headed for elections on June 25, after the last seven days saw more than 100 people killed as fighting between rival Islamists and other militias gripped the country.

Protests closed the headquarters of an oil company on Thursday, and a number of major oil companies evacuated their staff in light of the violence.

Previously, major pipelines and oilfields were also closed due to protests, and the government has only recently negotiated the release of 2 major ports from militants. Libya’s output was at 230 000 bpd as of Wednesday, in contrast with the 1.4 million a year ago.

Outlook

Monday is a holiday in the US and UK, and there will be no trading on the NYMEX or LME. However, the rest of the week will offer economic important data.

Tuesday will see durable goods orders for April in the US, with expectations of a near-standstill, after the sizable growth last month. Also on Tuesday, services PMI and consumer confidence for May will be revealed. Experts suggest consumers will report a slightly improving sentiment for the economy.

Wednesday will post data from the EU, before on Thursday the US reveals quarterly GDP growth. Analysts expect a slight contraction after the brutal winter halted economic activities for a prolonged period. Also on Thursday, pending home sales for April in the US will be reported, with forecasts of small gains.

On Friday, a report on personal income and spending for April in the world’s top economy will be released. Economists project a minor monthly increase in both.

Technical view

According to Binary Tribune’s analysis for Tuesday, in case the West Texas Intermediate July future on the NYMEX breaches the first resistance level at $104.69, it probably will continue up to test $105.02. Should the second key resistance be broken, the US benchmark will most likely attempt to advance to $105.55.

If the contract manages to breach the first key support at $103.83, it will probably continue to drop and test $103.30. With this second key support broken, the movement to the downside will probably continue to $102.97.

Meanwhile, July Brent on the ICE will see its first resistance level at $110.74. If breached, it will probably rise and probe $110.95. In case the second key resistance is broken, the European crude benchmark will probably attempt to advance to $111.19.

If Brent manages to penetrate the first key support at $110.29, it will likely continue down to test $110.05. With the second support broken, downside movement may extend to $109.84 per barrel.