WTI futures were steady during early trade in Europe today, while Brent gained with support from the conflict in Ukraine. Fighting intensified on Monday, after on Sunday the Eastern European country held presidential elections, in a bid to restore stability and unity to a divided nation. Elsewhere, a number of important economic figures for the US will be reported this week, with expectations of improving readings on the worlds top oil-consuming economy.
West Texas Intermediate futures for settlement in July traded for $104.40 per barrel at 7:19 GMT on the New York Mercantile Exchange, up 0.05%. Prices ranged from $103.92 to $104.50 per barrel, nearing a three month peak. Yesterday the US benchmark added 0.03% with muted trade, due to a US and UK holiday. Last week the contract gained 2.71%, after the Energy Information Administration in the US revealed supplies of crude had decreased by almost 8 million barrels.
Meanwhile on the ICE in London, Brent futures due in July recorded a 0.27% gain to trade for $110.62 per barrel at 7:05 GMT. Daily high and low stood at $110.80 and $110.31 per barrel, respectively. Brent’s premium to WTI stood at $6.22, widening last session’s closing margin of $5.94. Yesterday the European dropped 0.20%, after On Friday the contract closed for a 0.71% weekly increase, reaching an 11-week peak of $111.04 per barrel.
Ukraine
Ukraine saw an escalation of fighting on Monday, as militants attacked the airport in Donetsk, and authorities soon retaliated, employing air-strikes and heavy weaponry. The press office of the “Donetsk Peoples Republic” said for Russian news agency ITAR TASS that 24 injured rebels were killed while being transported, when the truck they were in came under fire. The mayor of Donetsk reported there have been civilian casualties and urged the populace to stay indoors.
The attack came a day after the presidential election took place, with a clear winner in the first round. Former foreign minister and billionaire Petro Poroshenko received about 54% of the vote. Turnout was probably very poor, about 50%, with the separatist provinces of Luhansk and Donetsk boycotting the vote, and forcefully closing all voting stations. The airport attack is probably in address to the new presidents plans to visit the Donbass soon.
Mr Poroshenko said he will not allow the Donbass to be “turned into Somalia,” and dismissed any talks with the armed rebels. He vowed to press on with the “anti-terrorist” operation, and that unity and peace are his ultimate goals. He added that for any peaceful resolution to be lasting, there must be cooperation with Russia, and said he is ready to work with the Kremlin. Meanwhile, Russian Foreign Minister Sergei Lavrov also said Moscow was ready to work with the new Ukrainian president, but insisted military actions must cease.
Elsewhere, Libya also offered further support, after rebels leaders spoke of reversing the deal to reopen two major oil-exporting terminals in the country. Libyas output was at 160 000 barrels per day as of yesterday, revealed Mohamed Elharari, a spokesman for state-run National Oil Corp.
Libya is facing civil strife, as fighting between rival parties left scores dead last week. The government scheduled general election for June 25, in an attempt to quell unrest, but to no avail. Islamist and other armed brigades control swathes of the country and continue to fight.
Libya holds Africas largest oil reserves and can potentially produce more than 4 million barrels daily.
US economy
Today the US, which consumes 21% of all oil in the world, will reveal several important indicators for the health of the economy. Foremost, durable goods orders for April are to be reported. Experts suggest total orders have decreased by 0.5% on a monthly basis after gaining 2.5% in March, while core orders, which exclude the more volatile transportation items, have gained 0.3% after a 2.1% growth in March.
Later today, Markit will post its preliminary services PMI for May. Analysts forecast a slightly quicker expansion for the services sector, which accounts for almost 80% of US GDP, with a figure of 55.6, up from 55.0 for April.
Lastly, the Conference Board (CB) will reveal its consumer confidence index for May. It is a leading indicator for consumer spending, which generates about 70% of US GDP. Analysts predict the CB will report an improving consumer sentiment, logging the index at 83.0, up from 82.3 for April.
On Wednesday the EU will post data. Consumer confidence for May is projected to be slightly improving, but still negative at -7.0, up from Aprils -8.6. Industrial sentiment, however, is forecast to be worsening at -4.0, from -3.6 for the previous month.
The sluggish recovery in the EU, as seen through a number of mediocre or outright bad figures recently, prompted ECB President Mario Draghi to suggest easing might be due.
“If policy measures are announced to help boost growth in the euro zone, that should have a positive impact on Brent prices and also spill over to support WTI,” said for Reuters Ben Le Brun said, market analyst with OptionsXpress.
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 daily analysis, in case the West Texas Intermediate July future on the NYMEX breaches the first resistance level at $104.57, it probably will continue up to test $104.77. Should the second key resistance be broken, the US benchmark will most likely attempt to advance to $105.09.
If the contract manages to breach the first key support at $104.05, it will probably continue to drop and test $103.73. With this second key support broken, the movement to the downside will probably continue to $103.53.
Meanwhile, July Brent on the ICE will see its first resistance level at $110.66. If breached, it will probably rise and probe $111.01. In case the second key resistance is broken, the European crude benchmark will probably attempt to advance to $111.46.
If Brent manages to penetrate the first key support at $109.86, it will likely continue down to test $109.41. With the second support broken, downside movement may extend to $109.06 per barrel.
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