Crude Oil Under Pressure, US CPI Misses Estimate

US Crude has posted slight losses on Wednesday, as February futures are trading at $28.44 a barrel in the North American session. In economic news, CPI posted a weak reading of 0.1%, short of the estimate of 0.0%. Building Permits dipped in December, but managed to beat expectations. The US will release two key events on Thursday, as Unemployment Claims and the Philly Fed Manufacturing Index.

Weak US inflation indicators remain a concern for Federal Reserve policymakers, who must decide whether another rate hike would be appropriate in early 2016. This was underscored on Wednesday, as key inflation numbers missed their estimates. CPI dropped 0.1%, short of the estimate of 0.0%. Core CPI also softened, posting a gain of 0.1%. This was short of the forecast of 0.2%. Will these weak numbers dampen Fed enthusiasm for a rate hike? There is speculation that the Fed could make a move in March, contingent on the US economy continuing to show strong numbers. At the same time, minutes from the Federal Reserve Policy meeting in December indicated that some policymakers are concerned that the inflation picture may not improve anytime soon, and it would be premature to raise rates again before inflation levels improve.

Is crude oil in free-fall? January has been disastrous for crude oil prices, which have plunged a remarkable 23% and is languishing at levels not seen since February 2004. There don’t appear to be any lifelines on deck for the plummeting commodity. On Tuesday, the well-respected International Energy Agency stated that oil prices could continue to slide. In a development which could exacerbate the global oil slump, Iran has been given the green light to resume oil exports. Western nations, led by the US, have officially lifted sanctions on Iran, after the International Atomic Energy Agency announced that Iran had fully complied with its obligations under the nuclear agreement. Iran is expected to immediately begin exporting up to 600,000 barrels/day, adding to the huge glut of oil on global markets. Meanwhile, OPEC said that it had pumped less oil in December, but this is unlikely to increase oil prices, as Iran becomes the latest supplier in an overly crowded market.

WTI/USD Fundamentals

Wednesday (Jan. 20)

  • 8:30 US Building Permits. Estimate 1.20M. Actual 1.23M
  • 8:30 US CPI. Estimate 0.0%. Actual -0.1%
  • 8:30 US Core CPI. Estimate 0.2%. Actual 0.1%
  • 8:30 US Housing Starts. Estimate 1.19M. Actual 1.15M
  • 10:30 US Crude Oil Inventories. Estimate 3.3M

Thursday (Jan. 21)

  • 8:30 US Philly Fed Manufacturing Index. Estimate -3.1 points
  • 8:30 US Unemployment Claims. Estimate 281K

*Key releases are highlighted in bold

*All release times are EST

WTI/USD for Wednesday, January 20, 2016

WTI/USD January 20 at 10:35 GMT

Open: 29.57 Low: 28.36 High: 29.57 Close: 28.44

WTI/USD Technical

S3 S2 S1 R1 R2 R3
20.00 22.28 26.64 30.00 32.22 35.09
  • WTI/USD posted losses in the Asian session and leveled off in European trade. The pair has resumed moving lower in North American trade.
  • The round number of 30.00 is the next resistance line
  • 26.64 is providing support

Further levels in both directions:

  • Below: 26.64, 22.88 and 20.00
  • Above: 30.00, 32.22 and 35.09

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.