US Crude Oil Dips Lower, US CPI Within Expectations

US crude has posted slight losses, continuing the slight downward trend we have seen most of the week. WTI Crude is trading at $46.41 in the North American session, its lowest level in close to a month. Brent crude is trading at $47.21, for a premium of $0.80. On the release front, consumer inflation was within expectations, as Core CPI and CPI both posted small gains of 0.2%. The Philly Fed Manufacturing Index beat expectations, but Unemployment Claims was higher than expected. On Friday, the US releases Building Permits, a key release.

WTI crude prices have been pointing downwards, even as stockpiles of US crude continue to decline. Crude Oil Inventories posted a drop of 0.9 million barrels last week. The indicator has recorded declines in five of the past six readings, as lower supplies have helped stabilize the price of US crude in recent weeks. Meanwhile, OPEC said on Tuesday that it expects oil prices to drop in the second half of 2016, as shutdowns in Nigeria and Canada are expected to lead to tighter supplies than expected. Still, OPEC does not expect prices to move significantly higher, as the cartel acknowledged that the there is a massive oversupply of oil, which is weighing on oil prices.

The Federal Reserve was center stage on Wednesday, but there was no surprises as the Fed opted for the sidelines and held the benchmark rate at 0.25%, where it has been pegged since December 2015. A dismal Nonfarm Payrolls report and dovish statements from Fed chair Janet Yellen and her colleagues had all but decimated any chance of a June hike. Back in April, Fed chair Janet Yellen had renewed hopes of rate hike in the summer, when she said that she expected a rate hike in “the coming months”. The Fed’s tone has drastically changed since then, and there is a strong likelihood that the Fed will raise rates only once in 2016. The Fed statement did not shed any light on the timing of a rate hike, although many analysts are circling September in their calendars. The statement was cautious in tone, stating that the Fed expects US inflation levels to remain at low levels in the near term. As well, the Fed lowered its rate path outlook for 2016 and 2017. Gone are the heady days of December, when the Fed hinted that it could raise rates up to four times in 2016. Many analysts were skeptical about this rosy (brash?) prediction, and it appears that the Fed was overly optimistic about the strength of the US economy, as June has arrived and we are yet to see a rate hike in 2016.

WTI/USD Fundamentals

Thursday (June 16)

• 8:30 US CPI. Estimate 0.3%. Actual 0.2%
• 8:30 US Core CPI. Estimate 0.2%. Actual 0.2%
• 8:30 US Philly Fed Manufacturing Index. Estimate 1.1. Actual 4.7
• 8:30 US Unemployment Claims. Estimate 267K. Actual 277K
• 8:30 US Current Account. Estimate -125B. Actual -125B
• 10:00 US NAHB Housing Market Index. Estimate 59. Actual 60
• 10:30 US Natural Gas Storage. Estimate 66B. Actual 69B

Friday (June 17)

• 8:30 US Building Permits. Estimate 1.15M

*Key events are in bold

*All release times are EDT

WTI/USD for Thursday, June 16, 2016

WTI/USD June 16 at 12:10 EDT

Open: 47.43 Low: 46.16 High: 47.72 Close: 46.41

WTI/USD Technical

• WTI/USD was flat in the Asian session. The pair has posted losses in the European and North American sessions.
•  43.45 is providing support
• 46.69 was tested earlier in resistance and is under strong pressure

Further levels in both directions:

• Below: 43.45, 39.32 and 35.25
• Above: 46.69, 50.13, 53.50 and 56.79

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