US Crude Higher, Oil Producers Talk Cap

US crude futures have posted gains on Wednesday, erasing the losses sustained in the Tuesday session. Crude is trading at $37.50 a barrel in the North American session. Brent crude futures are trading at $40.72, as Brent’s premium stands at $3.22.  In economic news, US Wholesale Inventories posted a gain of 0.3%, beating expectations. US Crude Inventories rose by 3.9 million barrels, above the estimate of 3.0 million.

US crude prices are higher on Wednesday, despite an EIA report of a surplus of 3.9 million, well above expectations. Investors were more interested in the news that OPEC and other oil producers were planning to meet in Moscow on March 20 to discuss capping production. Oil prices have risen some 25% since mid-February, but with a huge oversupply of the commodity and no sign of demand increasing, prices could reverse and head towards the symbolic $30 level. The collapse in oil prices since mid-2015 may have put a smile on the face of the US consumer, but has also been a major contributor to weak inflation levels in the US and other developed economies.

A strong US Nonfarm Payrolls is often bullish for the US dollar, but an excellent January report failed to buoy the greenback against its major rivals late last week. The indicator impressed with a reading of 242 thousand, much higher than the estimate of 195 thousand. This was much stronger than the previous (revised) reading of 171 thousand. The US economy has added an average of 225,000 jobs per month since December, an impressive number considering that the economy has softened in the early part of 2016. Why then, did a stellar NFP release not impress the markets? The reason was that wage growth, which has consistently lagged behind other employment indicators, surprised the markets with a decline of 0.1% in January, the first drop in wages since December 2014. This indicator is closely linked to inflation, since an increase in wages means workers have more money to spend. The indicator’s decline means that that Federal Reserve’s inflation target of about 2.0% remains far off, so the Fed, which is keeping a close eye on the weak inflation picture, is unlikely to press the rate trigger at its policy meeting later this month.

WTI/USD Fundamentals

Wednesday (March 9)

  • 10:00 US Wholesale Inventories. Estimate -0.2%. Actual 0.3%
  • 10:30 US Crude Oil Inventories. Estimate 3.0M. Actual 3.9M
  • 13:01 US 10-year Bond Auction

*Key events are in bold

*All release times are EST

WTI/USD for Wednesday, March 9, 2016

WTI/USD March 9 at 11:15 EST

Open: 36.50 Low: 36.38 High: 38.01 Close: 37.94

WTI/USD Technical

S3 S2 S1 R1 R2 R3
32.22 35.09 37.75 40.00 43.45 46.69
  • WTI/USD was flat in the Asian session. The pair has posted slight gains in the European session and stronger gains in North American trade.
  • There is resistance at 40.00
  • 37.75 is a weak support line

Further levels in both directions:

  • Below: 37.75, 35.09, 32.22 and 30.00
  • Above: 40.00, 43.45 and 46.69

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.