US Crude Steady, Durable Goods Reports Shine

US crude is steady on Thursday, as March futures trade at $31.42 a barrel in the North American session. Brent crude futures are trading at $33.33. On the economic front, durable reports were excellent as Core Durable Goods Orders gained 1.8%, while Durable Goods Orders surged 4.9%. Unemployment Claims rose to 272 thousand, within expectations.

There was good news, for a change, from the US manufacturing sector on Thursday. US durable goods reports posted excellent gains in January. Core Durable Goods rose 1.8%, crushing the estimate of 0.2%. This marked the key indicator’s strongest showing since March 2014. Durable Goods Orders followed suit with a sharp rise of 4.9%, rebounding from the previous reading of -5.1%. This was stronger than the estimate of 3.0%. These excellent figures point to stronger domestic consumption, at a time when the US economy is grappling with a downturn in global demand, which has taken its toll on the export and manufacturing sectors. A strong US dollar, which has posted broad gains in recent months, has only exacerbated the situation. The good news was tempered by a weak employment report, as Unemployment Claims rose to 272 thousand, very close to the estimate of 271 thousand.

US fundamentals have softened in the early part of 2016, and the American consumer has become less optimistic about the economy as a result. This was underscored by CB Consumer Confidence, which slid to 92.2 points in February, well off the forecast of 97.4 points. This marked a three-month low for the key indicator. Weaker consumer confidence could well translate into a decrease in consumer spending, a key driver of economic growth. On Friday, the US releases Preliminary GDP for the fourth quarter, with the estimate standing at 0.4%.

US crude prices remain above the $30 level, but the prognosis for a recovery in prices does not appear promising. Oil producing nations have been unable to agree on ways to reduce production in order to raise prices. Saudi Arabia and Russia have shown willingness to lower production, but not unexpectedly, Iran has been far less flexible, as it is desperate for cash and is looking to gain as much market share as possible following a long absence as an oil exporter. On Tuesday, Saudi oil minister Ali Ibrahim Naimi said that producers could meet in March to discuss an output freeze, but he ruled out production cuts. Earlier in the week, the International Energy Agency (IEA) issued a pessimistic report about the future of oil prices. The IEA said that oil prices are unlikely to show any significant rise before 2017, and any price rise will be gradual due to the huge inventories which have filled storage facilities to capacity across the globe, including those in the US. The IEA did not mince words in its assessment, stating that “today’s oil market conditions do not suggest that prices can recover sharply in the immediate future – unless, of course, there is a major geopolitical event”. Meanwhile, US Crude Inventories jumped to 3.5 million, much higher than the estimate of 2.0 million, as US crude supplies remain much higher than demand.

WTI/USD Fundamentals

Thursday (Feb. 25)

• 8:30 US Core Durable Goods Orders. Estimate 0.2%. Actual 1.8%
• 8:30 US Unemployment Claims. Estimate 271K. Actual 272K
• 8:30 US Durable Goods Orders. Estimate 3.0%. Actual 4.9%
• 9:00 US HPI. Estimate 0.5%. Estimate 0.4%
• 10:30 US Natural Gas Storage. Estimate -125B

Upcoming Key Events

Friday (Feb. 26)

• 8:30 US Preliminary GDP. Estimate 0.4%

*Key events are in bold

*All release times are EST

WTI/USD for Thursday, February 25, 2016

WTI/USD February 25 at 11:05 EST

Open: 32.16 Low: 31.32 High: 32.27 Close: 31.42

WTI/USD Technical

• WTI/USD was flat in the Asian session. The showed choppiness in the European session, and has posted slight losses in the North American trade.
• There is resistance at 32.22
• The round number is providing support

Further levels in both directions:

• Below: 30.00, 26.64 and 22.88
• Above: 32.22, 35.09, 37.75 and 40.00

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.