Crude oil trading outlook: WTI and Brent futures climb on China PMI

WTI and Brent futures edged higher during early trade in Europe today, as investors priced in a brighter demand outlook in second-top oil consumer China. Upcoming US inventories data is also on the radar, after increased Libyan output depressed prices on Monday.

WTI futures for November delivery on the New York Mercantile Exchange traded at $91.26 per barrel at 6:59 GMT today, up 0.43% for the day. Prices had ranged from $90.58 to $91.48 per barrel. The US benchmark dropped 0.85% on Monday after clocking minor gains last week.

Meanwhile on the ICE in London, November Brent stood at $97.25 per barrel, up 0.29%, with prices between $96.90 and $97.48 per barrel. The contract’s premium its US counterpart widened to $5.99. The European brand lost 1.5% on Monday, with the November future recording a two-year bottom at $96.38.

“For today, [Chinese PMI data] will be the supporting reason for higher prices,” Hong Sung Ki, an analyst at Samsung Futures Inc. in Seoul, said for Bloomberg. “The data reduces concern in the market that crude demand in China will be affected by slowing growth.”

HSBC and Markit posted their preliminary figure on Chinese manufacturing PMI late yesterday, logging at 50.5, above expectations also above the “50.0” mark, signaling the sector has expanded in September. Factories are the bulk contributors to Chinese industrial output, which generates about half of the countrys GDP. At the same time, however, physical goods, such as those produced in factories, need to be transported, hence the manufacturing PMI figure is a key leading gauge for Chinese oil demand.

The second-top economy in the world is also the second-top oil consumer, and will account for 11% of all demand this year, the International Energy Agency (IEA) says.

Investors now eye upcoming data on Eurozone manufacturing PMI figures. French factories are expected to log another month of significant contraction at 47.0, while Germany will also probably log below-par at 51.2. The Bloc-wide reading is projected at 50.5, signaling fragile overall growth for the worlds top single-currency economy.

Key data on US demand and supply is also due today, with the industry-funded American Petroleum Institute (API) reporting its weekly readings on US oil inventories.

US oil inventories

API collects data on a voluntary basis and its figures could be highly skewed, though they are the leading gauge ahead of the official Energy Information Administration (EIA) weekly report on Wednesday.

A Bloomberg survey projected crude stocks had added 0.75 million barrels in the week through September 19, while gasoline was down 0.3m and distillates, a category which includes diesel and heating fuel, grew by 0.35m.

Meanwhile, Libya reopened production at the Sharara oil field, after fighting between rival militias closed it last week. The news depressed crude to near multi-year lows yesterday, as it heralded the return of high-quality Libyan oil to the already over-supplied market.

Talks of a cut in output to be discussed and implemented by OPEC offered background support to crude last week, as investors sought cues as to the intentions of the worlds top oil-exporting body in regards to prices falling below the $100 benchmark. Many nations have set the $100 per barrel as a budgetary minimum, and prices lingering below the threshold hurts their public, and private, finances.

OPEC official moved to dispel speculation about an imminent output cut, but the group did lower its marketable oil expectations for 2015, signaling a decrease in production could follow as to meet market demand.

Technical support and resistance levels

According to Binary Tribune’s daily analysis for Monday, West Texas Intermediate November futures’ central pivot point is at $91.07. In case the contract breaches the first resistance level at $91.72, it will probably continue up to test $92.58. Should the second key resistance be broken, the US benchmark will most likely attempt to advance to $93.23.

If the contract manages to breach the first key support at $90.21, it will probably continue to drop and test $89.56. With this second key support broken, movement to the downside will probably continue to $88.70.

Meanwhile, November Brent’s central pivot point is projected at $98.09. The contract will see its first resistance level at $98.19. If breached, it will probably rise and test $99.40. In case the second key resistance is broken, the European crude benchmark will probably attempt to advance to $100.31.

If Brent manages to penetrate the first key support at $96.07, it will likely continue down to test $95.16. With the second support broken, downside movement may extend to $93.95 per barrel.