WTI/USD – Crude Rises Above $45 as Crude Inventories Slide

US crude has posted slight gains on Wednesday, continuing the upward movement which marked the Tuesday session. In North American trade, WTI/USD futures are trading at $44.84 per barrel. Brent futures are trading at $46.54, as the Brent premium has narrowed to $1.70. In economic news, Crude Oil Inventories surprised with a sharp decline of 6.2 million barrels. The markets had predicted a surplus of 3.2 million. Later in the day, the Federal Reserve releases its policy statement and sets the benchmark rate, which is expected to remain pegged at 0.25 percent. On Thursday, the US releases unemployment claims.

Crude Oil Inventories posted a third weekly decline on Wednesday, as supplies dropped by 6.2 million. Market estimates have been well off the mark for all three readings, underscoring the challenge in making accurate predictions of crude inventories. The sharp drawdown gave a lift to US crude on Wednesday, briefly pushing the commodity above the symbolic $45 level. With the continuing oversupply of crude weighing on oil prices, there is a sense of urgency among oil producers to cap production in order to stabilize prices. Major oil producers will meet next week in Algiers, and Venezuelan President Nicolas Maduro said that OPEC and non-OPEC countries were “close” to reaching a deal. However, previous summits have ended without any agreement on a production freeze, and there is a great deal of skepticism that things will be any different this time around.

All eyes are on the Federal Reserve, which will release a highly-anticipated policy statement later in the day. Most investment strategists and economists are anticipating that the Fed will hold the benchmark interest rate unchanged opting instead to tweak the Federal Open Market Committee (FOMC) statement and use the dot plot to signal a December rate hike. Fed Chair Yellen is expected to drive the message further during her press conference. Back in August, Yellen spoke in very positive terms about the US economy, and this raised hopes that the Fed might raise rates in September. However, these expectations were largely dashed after the US posted disappointing GDP and employment reports. Recent comments from FOMC members, which have been almost contradictory at times, have left the markets confused and reinforced the perception that the Fed remains divided regarding its near-future monetary policy. A clear and decisive message from Yellen could go a long way in improving market sentiment. If the Fed provides some clues about a December move, the US dollar could move higher. Even if the Fed does go ahead with a December hike, it will prove to be a token raise, coming a year after the last rate hike. In December 2015, the Fed hinted that it expected to implement a series of rate hikes in 2016, but to the market’s chagrin, this never materialized

WTI/USD Fundamentals

Wednesday (September 21)

• 10:30 Crude Oil Inventories. Estimate 3.2M. Actual -6.2M
• 14:00 FOMC Economic Projections
• 14:00 FOMC Federal Funds Rate. Estimate <0.50%
• 14:30 FOMC Press Conference

Thursday (September 22)

• 8:30 US Unemployment Claims. Estimate 261K

*Key events are in bold

*All release times are EDT

WTI/USD for Wednesday, September 21, 2016

WTI/USD September 21 at 11:05 EDT

Open: 44.85 High: 45.50 Low: 44.71 Close: 45.13

WTI USD Technical

• WTI/USD was flat in the Asian session. The pair posted small losses in the European session and has rebounded with sharp losses in  North American trade
• 43.45 was tested earlier in support and remains a weak line. It could break in the North American session
• There is resistance at 46.49

Further levels in both directions:

• Below: 43.45, 38.38 and 32.33
• Above: 46.69, 50.13, 53.50 and 59.69

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