US Climbs as Crude Inventories Drops Sharply

US crude has posted gains on Wednesday, continuing the upward trend in the Tuesday session. Crude is trading at $45.78 per barrel in the North American session. Brent crude is trading at $46.89, as the Brent premium stands at $1.11. On the release front, EIA Crude Oil Inventories posted a sharp decline of 3.4 million barrels, much weaker than expectations. On Thursday, we’ll get a look at US Unemployment Claims, with the estimate expected to edge higher to 277 thousand.

Crude Oil Inventories, a weekly report, surprised the markets with a sharp decline of 3.4 million. The markets had expected a small gain of 0.7 million, and this figure marked the first decline in stockpiles in five weeks. US crude jumped on the news and has gained 1.0% in value on the day. The markets have been focused on Canadian oil production, as a massive wildfire in northern Alberta has forced the evacuation of 90,000 people and disrupted sand oil production, which has led to higher crude prices. Oil firms have restarted production, albeit on a limited basis.

US employment indicators appear to be taking one step forward, one step backward. On Tuesday, JOLT Job Openings looked sharp in April, jumping to 5.76 million. This figure was much stronger than the estimate of 5.56 million. However, last week’s host of employment numbers were a mix, which predictably has raised concerns about the strength of the US labor market. Last week, Nonfarm Payrolls looked awful, as the key indicator slid to just 160 thousand, well short of the forecast of 203 thousand. This marked the lowest reading in seven months. ADP Nonfarm Payrolls and Unemployment Claims both missed their estimates. In other releases on Friday, wage levels showed no change, as Average Hourly Earnings posted a weak gain of 0.3%. The unemployment rate remained steady at 5.0%.

The Federal Reserve hasn’t made a move since December’s historic rate hike, leaving the markets looking for hints as to when the Fed might make a move. In its April policy statement, the Fed didn’t raise rates, but the message to the markets with regard to the US economy was one of cautious optimism. The statement noted continuing improvement in the labor market but added that it was keeping a watchful eye on low inflation levels. The Fed statement appeared to leave the open to a June hike, but last week’s soft payrolls report has greatly reduced the likelihood of a June move. On Friday, New York Fed president William Dudley said he remains confident that the Fed could raise rates as much as twice this year, but many analysts are skeptical if the Fed will raise rates before 2017. Economic releases, especially employment and inflation indicators, will be major factors as the Fed must decide whether to press the rate trigger in June.

WTI/USD Fundamentals

Wednesday (May 11)

  • 10:30 US Crude Oil Inventories. Estimate 0.7M
  • 13:01 US 10-year Bond Auction
  • 14:00 US Federal Budget Balance. Estimate 116.2B

Upcoming Key Events

Thursday (May 12)

  • 8:30 US Unemployment Claims. Estimate 277K

*Key events are in bold

*All release times are EDT

WTI/USD for Wednesday, May 11, 2016

WTI/USD May 11 at 11:15 EDT

Open: 44.66 Low: 43.97 High: 45.81 Close: 45.78

WTI/USD Technical

S3 S2 S1 R1 R2 R3
37.75 40.00 43.45 46.69 50.13 51.59
  • WTI/USD was choppy in the Asian and European sessions. The pair has posted gains in North American trade.
  • 43.45 is providing support
  • 46.69 is a weak resistance line

Further levels in both directions:

  • Below: 43.45, 40.00, 37.75 and 35.09
  • Above: 46.69, 50.13 and 51.59

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.