US Crude Continues to Drift, CPI Disappoints

US crude futures are unchanged on Thursday, following the lack of activity which marked the Wednesday session. US crude is trading at $41.99 per barrel in the North American session. Brent crude futures are trading at $44.39, as the Brent premium stands at $2.40.  In the US, CPI and Core CPI both posted small gains of 0.1%, short of their estimates. US Unemployment Claims dropped sharply to 253 thousand, well below the forecast.

US crude oil prices remained steady on Wednesday, despite an EIA crude inventory report which showed a surplus of 6.6 million, crushing the surplus of 0.9 million barrels. This reading contrasted sharply with the previous release, which showed a strong decline. Moving to the international oil markets, at least 15 oil producers will gather in Doha for a critical meeting on April 17. Participants at the Doha gathering will be looking to cap production limits and curb the huge worldwide glut of oil. However, previous attempts to reach an agreement to cut production have failed. With many producers, including Iran, interested in ratcheting up production to increase oil revenues, the meeting may end up with little more than a “soft agreement” which doesn’t change fundamentals. If producers fail to show any progress, oil prices could reverse and head lower next week.

US numbers were a mix on Thursday. CPI and Core CPI, key gauges of consumer inflation, posted small gains of 0.1%. The Core CPI release was particularly disappointing, coming after two consecutive gains of 0.3%. The weak inflation numbers will make it difficult to make a case for raising interest rates in the first half of 2016 and bolsters the dovish position of Janet Yellen and her supporters. Deustche Bank analyst Brett Ryan summed up the soft US inflation picture, noting that “we’re still importing deflation from other areas of the world”. There was much better news on the employment front, as Unemployment Claims fell to 253 thousand, its lowest weekly reading since March 1973. This release is another confirmation of a robust US labor market.

US retail sales reports for March disappointed. Core Retail Sales improved to 0.2%, but fell short of the forecast of 0.4%. Retail Sales surprised with a decline of 0.3%, shy of the estimate of a 0.1% gain. It marked the second straight drop for the indicator. Consumer spending represents the biggest part of the economy, so these figures could spell trouble at a time that the export sector remains soft due to weak global demand. PPI, a key gauge of inflation in the manufacturing sector, continues to struggle, posting a third decline in four months. The index dipped 0.1%, well off the estimate of a 0.3% gain.

WTI/USD Fundamentals

Thursday (April 14)

• 8:30 US CPI. Estimate 0.2%. Actual 0.1%
• 8:30 US Core CPI. Estimate 0.2%. Actual 0.1%
• 8:30 US Unemployment Claims. Estimate 270K. Actual 253K 
• 10:30 FOMC Member Jerome Powell Speaks
• 10:30 US Natural Gas Storage. Estimate 1B
• 13:01 US 30-year Bond Auction

Upcoming Key Events

Friday (April 15)

• 10:00 US Preliminary UoM Consumer Sentiment. Estimate 91.9

*Key events are in bold

*All release times are DST

WTI/USD for Thursday, April 14, 2016

WTI/USD April 14 at 11:30 DST

Open: 41.70 Low: 40.84 High: 42.15 Close: 41.81

WTI/USD Technical

• WTI/USD has shown limited movement during the day
• 40.00 is providing support
• There is resistance at 43.45

Further levels in both directions:

• Below: 40.00, 37.75, 35.09 and 32.22
• Above: 43.45, 46.69 and 50.13

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