Crude oil trading outlook: WTI and Brent futures steady after US oil report, EU to reveal sanctions

WTI and Brent futures were slightly lower and losing during early trade in Europe today. The US posted oil inventories figures yesterday, revealing another draw for crude and a drop for supplies at Cushing. Elsewhere, the EU is expected to post its expanded list of sanctioned Russian individuals and companies today.

WTI for September delivery stood at $102.98 per barrel at 7:00 GMT in New York today, down 0.14%. Prices ranged from $103.31 to $102.79 per barrel. The contract gained 0.71% yesterday, an is up some 1.1% so far this week.

Meanwhile, September Brent on the ICE in London traded at $107.98 per barrel, down 0.05%. Daily high and low were at $108.21 and $107.86 per barrel, respectively. Brents premium to WTI was $5.00, after last sessions closing margin of $4.91. The European contract added 0.65% on Wednesday, and is up about 0.8% for the week so far.

“The long-run story has not changed, global supply still looks healthy,” Barnabas Gan, economist at Oversea-Chinese Banking Corp. in Singapore, said for Bloomberg. “The global growth tailwinds are expected to continue, and that does give oil investors a reason to see higher prices in the short term.”

US oil inventories

The US Energy Information Administration (EIA) posted its weekly oil inventories report for the seven day through July 18 yesterday. The log revealed a 3.969 million-barrel draw for commercial crude oil inventories, after the private American Petroleum Institute (API) had suggested a 0.555 million-barrel draw on Tuesday. A Bloomberg survey had projected a 2.9 million-barrel drop, while the Wall Street journal projected 2.5 million barrels drawn. The previous reading, for the week through July 11, showed crude inventories had dropped 7.5 million barrels.

Oil at Cushing, Oklahoma, the delivery point for the NYMEX contract and the largest hub in the US, was reported at 18.8 million barrels for a 1.5 million-barrel draw, after a further 0.6 million-barrel drop was logged for the previous week. Meanwhile, hubs at the Gulf Coast saw 0.9 million barrels drawn, after a 2.8 million drop was reported last week.

“I think many people are surprised that weve been able to get down to this low inventory” level in Cushing, Andy Lipow, president of Lipow Oil Associates in Houston, said for the Wall Street Journal. “The supplies of light, sweet crude that meet the Nymex contract [specifications] are very tight.”

Domestic production of crude oil was little changed for a reading of 8.565 million barrels per day (bpd), after more minor changes over the pat month. Meanwhile, imports of crude were also little changed at 7.407 million bpd.

Gasoline inventories added 3.379 million barrels for the week through July 18, while the API had reported a 3.6 million-barrel increase. Distillate fuels stockpiles levels increased by 1.636 million barrels, while the API posted a 2.5 million-barrel gain on Tuesday.

Refinery utilization rate was unchanged at 93.8%, after an increase of more than 7% for the past month. Gasoline production this week was slightly higher at 9.788 million bpd, while distillates output averaged 5.206 million bpd, also logging a minor increase.

“Were pumping a lot of juice—these refineries are running hard,” Donald Morton, senior vice president at Herbert J. Sims & Co., said for the Wall Street Journal. “Theyve still got good profit margins. Theyre trying to take advantage of it as much as they can.”

Ukraine

Two military aircraft were shot down by rebels over eastern Ukraine late on Wednesday, near the MH17 crash site. Authorities reported that the warplanes were at an altitude of some 5 kilometers when they were shot down, suggesting a Buk missile was used to bring them down.

A rebel spokesman denied that the separatists possess such weaponry, adding that the Ukrainian jets were shot down by a short-range mobile anti-aircraft weapon.

The US and UK earlier expressed unwavering confidence that it was indeed a Soviet-era Buk missile which brought down the Malaysian airliner last week. The Boeing 777 was shot down over rebel-held territory in Ukraine last Thursday, killing all 298 people on board.

Elsewhere, the flights “black boxes” arrived in Farnborough, UK, to be examined. Officials said the devices were in good condition and expected to find promising leads as to the precise fate of the Malaysian airliner. The process is said to take about 2 days.

Sources added, however, that there were signs of tampering with evidence at the crash site, the BBC reported. Some bodies were moved, and parts of other aircraft were scattered among the crash site.

Sanctions

The EU is expected to release the expanded list of sanctioned Russian and Ukrainian individuals and companies later today. The Blocs members states foreign ministers decided to step up measures against entities thought liable for obstructing peace in Ukraine. The measures are said to target Russian high-tech, energy and defense firms, in a move similar to that of the US last week.

Just hours before MH17 was shot down the US also widened the list of sanctioned entities. The list of companies included small-arms manufacturer Kalashnikov, Gazprom Bank, as well as giant Rosneft.

China

HSBC posted its preliminary reading on Chinese manufacturing PMI for July earlier today, to reveal a confident stance for the worlds second-top oil consumer. The figure was logged at 52.0, well ahead of expected 51.0 and the highest standing in 18 months. Anything above 50 is read for an expanding sector, and anything below means contraction, with the higher the margin from 50, the greater the pace of either expansion or contraction.

“China is a big commodities player, and this is definitely positive for oil,” Avtar Sandu, senior commodities manager at Phillip Futures in Singapore, said for Reuters.

Technical view

According to Binary Tribune’s daily analysis, in case West Texas Intermediate September futures breach the first resistance level at $103.71, they will probably continue up to test $104.30. Should the second key resistance be broken, the US benchmark will most likely attempt to advance to $105.26.

If the contract manages to breach the first key support at $102.16, it will probably continue to drop and test $101.20. With this second key support broken, the movement to the downside will probably continue to $100.61.

Meanwhile, September Brent on the ICE will see its first resistance level at $108.56. If breached, it will probably rise and test $109.10. In case the second key resistance is broken, the European crude benchmark will probably attempt to advance to $109.94.

If Brent manages to penetrate the first key support at $107.18, it will likely continue down to test $106.34. With the second support broken, downside movement may extend to $105.80 per barrel.