Crude oil little-changed amid weaker demand, Ukraine concerns

The two major crude oil contracts are little-changed this Friday afternoon. Brent fell back yesterday on news China’s oil imports had dropped 8% in March and as reports suggested that the Libyan crude oil terminal Al-Hariga, which has a normal output capacity of 110,000 barrels per day, was expected to be reopened next week after it was recovered from the rebel hands. On top of this, the International Energy Agency said that Iran once again broke the 1-million-barrel-per-day oil export limit that was imposed by the West under the interim nuclear deal agreed last year. After exporting 1.65 million barrels per day in February, the IEA has estimated that a further 1.05 million b/d were shipped out in March and this figure is likely to be revised higher on receipt of more complete data. However worries over potential disruptions of Russian energy supplies to Europe via Ukraine amid the on-going standoff between Moscow and the West have prevented Brent crude to fall more sharply. In fact, the London-based oil contract has just turned higher at the time of this writing.

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In the US, WTI has remained elevated despite the recent rises in crude stockpiles and the first build at Cushing in ten weeks. It looks like investors are paying greater attention to gasoline inventories which fell once again last week by 5.2 million. At 210.4 million barrels, they remain “well below the lower limit” of the average for this time of the year, according to the US Department of Energy. This suggests that demand is very strong for gasoline, which is significant as the US driving season has not even started yet. Ethnically however WTI has struggled to rise and hold above the $103.50 level over the past couple of days. As mentioned previously, this is where a bearish trend line that goes back to the summer of last year converges with the 78.6% Fibonacci retracement level of the downswing from the March peak. So, there is a chance for a pullback towards $102.20 in the near-term. However if WTI breaks and closes above $103.50 then we could easily see it revisit the March high of $105.20 and potentially beyond.

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