WTI/USD – US Crude Soars as IEA Predicts Tighter Oil Market

US crude has posted sharp gains on Thursday, rebounding from losses seen on Wednesday. In the North American session, WTI/USD futures are trading at $43.19. Brent crude has improved to $45.61, as the Brent premium has widened to $2.42. Crude responded positively to an IEA (International Energy Agency) report that said crude stockpiles will shrink in the third quarter. There was more good news from the US labor market, as Unemployment Claims dropped to 266 thousand, beating expectations. Friday will be busy, as the US releases key retail sales, CPI and consumer confidence reports.

US crude prices continue to show volatility this week. Crude has jumped 4.2% on Thursday, after the well-respected IEA stated that oil supplies will decrease in the third quarter, despite record pumping levels from OPEC in July. The IEA added that although oil prices have dropped recently, its balances do not show an oversupply in the second of 2016, and that it expects demand to increase in the third quarter. According to Phil Flynn, senior energy analyst at Price Futures Group, $40 level is a key support line and prices are expected to trade within a range for several weeks. Crude dropped 2.2% on Wednesday, after Crude Oil Inventories, often a market-mover of US crude, showed a surplus of 1.1 million last week, surprising the markets, which had anticipated a decline of 1.3 million. Crude Inventories has posted surpluses for three consecutive weeks, each time confounding the markets, which had predicted that crude stockpiles would decline.

US employment numbers continue to look sharp. On Thursday, it was the turn of Unemployment Claims, which dropped to 266 thousand, beating the forecast of 272 thousand. Earlier this week, the Labor Market Conditions Index and JOLTS Job Openings both beat expectations. Last week, Nonfarm Payrolls sparkled, surprising the markets and buoying the US dollar. The July indicator surprised the markets with a huge gain of 255 thousand, crushing the estimate of 180 thousand. This release follows the outstanding June reading of 280 thousand. There was more positive news as Average Hourly Earnings gained 0.3%, edging above the forecast of 0.2%. Prior to the payrolls release, a September hike was virtually off the table, especially in light of the soft US GDP report in late July. However, the stellar job numbers will force to Fed to give serious thought to a move in September. Employment and inflation releases in the next few weeks will be critical factors in determining if the Fed makes a move next month, or waits until December before revisiting the rate question.

WTI/USD Fundamentals

Thursday (August 11)

• 8:30 US Unemployment Claims. Estimate 272K. Estimate 266K
• 8:30 US Import Prices. Estimate -0.2%. Actual 0.1%
• 10:00 US Mortgage Delinquencies
• 10:30 US Natural Gas Storage. Estimate 24B
• 13:01 US 30-year Bond Auction

*Key events are in bold

*All release times are EDT

WTI/USD for Thursday, August 11, 2016

WTI/USD August 11 at 12:00 EDT

Open: 41.48 High: 43.38 Low: 41.11 Close: 43.33

WTI USD Technical

• WTI/USD was flat in the Asian session. The pair was choppy in the European session and has posted strong gains in North American trade
• 39.32 is providing support
• 43.45 is under strong pressure in resistance. It could break in the North American session

Further levels in both directions:

• Below: 39.32, 35.25 and 30.55
• Above: 43.45, 46.69, 50.13 and 53.50

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