Both West Texas Intermediate and Brent crude benchmarks touched fresh multi-month lows on Wednesday following bearish supply data by the American Petroleum Institute and after the IMF cut its global economic growth forecast.
On the New York Mercantile Exchange, US November crude fell by 0.64% to $88.28 per barrel by 11:50 GMT, having dropped to $87.39 earlier in the session, the lowest since April 2013. The contract shed 1.65% on Tuesday to close at $88.85 a barrel.
On the ICE, Brent crude for delivery in the same month lost 0.71% to trade at $91.46 a barrel. Prices fell earlier to $90.76, the weakest level since June 2012. The contract slid almost 5% last week, the most since April 2013, marking its fourth weekly decline in five. Brent’s premium to its US counterpart narrowed to $3.18 from Monday’s close at $3.26.
Oil prices extended their decline after industry data by the American Petroleum Institute showed a larger-than-expected build in US crude oil inventories last week. API reported that crude supplies surged by 5.1 million barrels, sharply exceeding analysts projections, while distillate fuel inventories declined by 1.1 million barrels. Gasoline inventories rose by 2.5 million barrels, defying expectations for a drop.
According to a Bloomberg survey before the Energy Information Administrations government data, crude oil supplies are projected to have risen by 2 million barrels in the seven days through October 3rd. In the refined product category, distillate fuel stockpiles, which include diesel and heating oil, likely declined by 1.25 million barrels, the survey showed, while gasoline inventories probably shrank by 500 000 barrels.
The oil market received a heavy blow after the International Monetary Fund trimmed yesterday its global economic growth forecast to 3.8% next year, down from the previously expected in July 4.0%, following a 3.3% growth projection for 2014.
Separately, data by the Intercontinental Exchange showed that the number of net Brent long positions fell by nearly a sixth to 36 704 in the week ended September 30th, the lowest since early-October 2011.
In Europe, Spain’s statistics agency (Instituto Nacional de Estadistica) reported at 7:00 GMT that the country’s industrial production expanded at an annualized 0.6% in August, following an upward-revised 0.9% growth in the previous month. Analysts had expected Spain’s industrial output to have grown by 1.4%.
Yesterday, Destatis reported that Germany’s industrial production contracted by 4% in August, the most since 2009, in the latest sign of deteriorating economic conditions in the leading EU economy, and the Eurozone as a whole. This comes after a downward-revised 1.6% expansion in July, while analysts had projected a moderate 1.5% decline in industrial output.
Market players also keenly awaited the minutes of the Federal Reserve’s most recent policy meeting, due to be released at 18:00 GMT, for clues of when the central bank will likely initiate its interest rate hike.
Junichi Ishikawa, an analyst at IG Markets in Tokyo, commented for Bloomberg: “If the Fed minutes today show discussions about specific timing of their interest-rate increase, that would boost the likelihood that the next policy statement will alter the wording around keeping borrowing costs low for an extended period. That will spur dollar buying.”
A strong dollar typically pressures dollar-denominated commodities as it makes them pricier for foreign-currency holders and limits their appeal as an alternative investment.
Technical view
According to Binary Tribune’s daily analysis, West Texas Intermediate November futures’ central pivot point is at $89.27. In case the contract breaches the first resistance level at $90.15, it will probably continue up to test $91.46. Should the second key resistance be broken, the US benchmark will most likely attempt to advance to $92.34.
If the contract manages to breach the first key support at $87.96, it will probably continue to drop and test $87.08. With this second key support broken, movement to the downside will probably continue to $85.77.
Meanwhile, November Brent’s central pivot point is projected at $92.17. The contract will see its first resistance level at $92.93. If breached, it will probably rise and test $93.76. In case the second key resistance is broken, the European crude benchmark will probably attempt to advance to $94.52.
If Brent manages to penetrate the first key support at $91.34, it will likely continue down to test $90.58. With the second support broken, downside movement may extend to $89.75 per barrel.
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