US Crude Dips, Jobless Claims Improve

US crude futures have lost ground on Thursday, reversing the upward trend which marked the Wednesday session. US crude is trading at $37.15 per barrel in the North American session. Brent crude futures are trading at $38.83, as the Brent premium has dropped to $1.68. In economic news, US Unemployment Claims dropped to 267 thousand, below the estimate. Later in the day, Fed chair Janet Yellen will deliver remarks in New York City.

US crude surged 4.9 percent on Wednesday, boosted by an EIA report that crude stockpiles declined 4.9 million. This sharp slide surprised the markets, which had projected a surplus of 3.1 million. At the same time, this was only the second decline in 2016 reported by the EIA, which measures US crude stockpiles on a weekly basis. The US and the rest of the world remains awash in a huge surplus of oil, and oil producers will meet in Doha on April 17 in an attempt to set production limits and stabilize oil prices. However, previous attempts to cap output have failed, and it’s doubtful if we’ll see any history made at the upcoming meeting. Senior officials are putting a positive spin on the gathering, but many OPEC nations have decided not to attend, and Iran, which was recently given the green light to resume oil exports, has announced that it plans to raise its output.

The US labor market continues to look robust, as Unemployment Claims dipped to 267 thousand, below the estimate of 271 thousand. Last week’s job numbers, were solid as well. Nonfarm Payrolls, the most important employment indicator, came in at 215 thousand in March, above the forecast of 206 thousand. Weekly unemployment rolls have remained below the 300,000 level for 57 weeks, the longest streak since 1973. A steady rise in hiring has translated into stronger consumer spending and a shot in arm for the US economy.

The Federal Reserve released the minutes of its March policy meeting on Wednesday. The minutes indicated that the Fed is unlikely to raise rates before June at the earliest. Although some policymakers expressed approval for a rate hike in April, others expressed concern about the risks to the US economy posed by global economic conditions. There was a split amongst members as to whether the recent pickup in inflation was sustainable. Many Fed members were worried about the lack of options available to the Fed since rates remain close to zero. This concern can have significant impact on the currency markets, since the dollar could strengthen if the Fed is unable to implement effective easing measures. The minutes appear to be a validation of Janet Yellen’s remarks last week, which were very dovish and dampened growing enthusiasm about a rate hike as early as April. So what can we expect from the Fed? There is a strong likelihood that the Fed will raise rates twice in 2016, but the timetable of any moves is unclear. Yellen speaks later on Thursday in New York, and the markets will be carefully monitoring her comments, looking for clues as to the Fed’s rate plans.

WTI/USD Fundamentals

Thursday (April 7)

  • 8:30 US Unemployment Claims. Estimate 271K. Actual 267K
  • 10:30 US Natural Gas Storage. Estimate 7B. Actual 12B
  • 15:00 US Consumer Credit. Estimate 15.0B
  • 17:30 US Fed Chair Janet Yellen Speaks
  • 16:15 FOMC Member Esther George Speaks

WTI/USD for Thursday, April 7, 2016

WTI/USD April 7 at 11:15 DST

Open: 37.75 Low: 36.90 High: 38.28 Close: 37.15

WTI/USD Technical

S3 S2 S1 R1 R2 R3
27.55 32.22 35.09 37.75 40.00 43.45
  • WTI/USD posted small gains in the Asian session. The pair reversed directions in the European session and has continued to move lower in North American trade
  • 35.09 is providing support
  • 37.75 has been busy and is currently a weak resistance line

Further levels in both directions:

  • Below: 35.09, 32.22 and 27.55
  • Above: 37.75, 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.