US Crude Steady, Crude Inventories Increase

US crude is showing slight movement on Thursday, as March futures trade at $30.78 in the North American session. Brent crude futures are trading quietly at $34.40. On the release front, the Philly Fed Manufacturing Index came in at -2.8 points, close to the estimate. Unemployment Claims dropped to 262 thousand, beating expectations. Crude Oil Inventories posted a gain of 2.1 million, short of the forecast. On Friday, we’ll get a look at the Consumer Price Index, the primary gauge of consumer inflation.

With oil storage facilities bursting to capacity and oil prices at multi-year lows, one would think that oil producing nations would collaborate and restrict output in order to prop up prices. However, internal bickering has resulted in a situation of “every man for himself”, as production remains at record levels. In the latest twist, Russia and some members of OPEC announced that they have agreed to freeze output levels, but said the agreement was contingent in other producers joining in. It would indeed be a shock if oil exporters could actually get their act together, as we’ve seen similar chatter before with no concrete results. A major fly in the ointment is Iran, a major exporter which has been shut out international markets for years and has just started to export its oil, following the removal of sanctions by the West. Iran is desperate for foreign cash and will likely want to export as much oil as it can, without regard to its market competitors. Under the current circumstances, oil purchasers can continue to get a good night’s sleep, as oil prices are unlikely to spike anytime soon.

On Wednesday, the Federal Reserve released the minutes of its January policy meeting. At that meeting, the Fed held rates at 0.25%, after raising rates in December for the first time in almost 10 years. The minutes reiterated the central bank’s concern that turmoil in global markets could have negative repercussions for the US economy. Policymakers sent out a broad hint that a rate hike is unlikely in March, as they discussed “altering their earlier views of the appropriate path for the target range for the federal funds rate”. This could have a negative impact on the US dollar, as investors may look elsewhere to park funds if US rates are not moving higher anytime soon. Federal Reserve chair Janet Yellen said last week that the Fed still planned to raise rates later in 2016, but FOMC member James Bullard opined that there was room to delay any rate moves, given global financial turmoil and weak US inflation. Still, a growing number of market players are skeptical that the Fed will make any moves before next year. Back in the heady days of December, the Fed hinted at a series of rate hikes during 2016, but the turmoil in the financial markets and the downturn in the US economy in 2016 has quickly dampened expectations of a rate move.

WTI/USD Fundamentals

Thursday (Feb. 18)

• 8:30 US Philly Fed Manufacturing Index. Estimate -2.9 points. Actual -2.8 points
• 8:30 US Unemployment Claims. Estimate 275K. Actual 262K
• 10:00 US Mortgage Delinquencies. Actual 4.77%
• 10:00 US CB Leading Index. Estimate -0.1%. Actual -0.2%
• 10:30 US Natural Gas Storage. Estimate -154B. Actual -158B
• 11:00 US Crude Oil Inventories. Estimate 3.2M. Actual 2.1M

Upcoming Key Events

Friday (Feb. 19)

• 8:30 US CPI. Estimate -0.1%
• 8:30 US Core CPI. Estimate +0.2%

*Key events are in bold

*All release times are EST

WTI/USD for Thursday, February 18, 2016

WTI/USD February 18 at 11:00 EST

Open: 31.45 Low: 31.02 High: 31.95 Close: 30.78

WTI/USD Technical

• WTI/USD has shown limited movement over the course of the day
• 30.00 remains busy and has switched to support. It is a weak line and could see further action in the North American session
• There is resistance at 32.22

Further levels in both directions:

• Below: 30.00, 26.64, 22.88 and 17.05
• Above: 32.22, 35.09 and 37.75

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