WTI/USD – Oil Rebounds Despite US Crude Surplus

US crude has posted gains in the Thursday session. In the North American session, US crude futures are trading at $53.21. Brent crude futures are trading at $56.35, as the Brent premium is $3.15. On the release front, US unemployment claims jumped to 259 thousand, well above the forecast of 247 thousand. New Home Sales also disappointed, dropping to 536 thousand. This was much lower than the estimate of 585 thousand.

As we begin 2017, there are two interesting developments which will likely affect the price of oil in the coming weeks and months. The first is the landmark deal hammered out between OPEC and other major producers to cut oil production in an attempt to raise prices. The agreement took effect on January 1, and oil producers expect the deal to remove 2 percent of global supply from the markets. However, as oil prices have moved above the $50 level, US shale producers have stepped in and raised US crude production. Crude stockpiles rose in the US for a third consecutive week, as the surplus of 2.8 million barrels easily beat the forecast of 1.5 million. OPEC is confident that the agreement will be honored and production levels will fall. Still, if US production continues to rise and offsets the cutbacks announced by OPEC, oil prices could head lower. We’ll have to wait for January production reports in the US and from OPEC to get a better idea of which way the global oil glut is headed.

Donald Trump has barely warmed up the presidential chair in the Oval Office, but he has wasted no time in advancing a protectionist stance. The week started with Trump signing an executive order formally withdrawing the US from the Trans-Pacific Partnership, a broad trade agreement that was to cover some 40 percent of global GDP. Trump had promised to leave the TPP during the election, arguing that the deal would hurt American workers. NAFTA could be Trump’s next target, as Trump wants to renegotiate the deal with Canada and Mexico. Trump has threatened to impose tariffs on companies that move production to Mexico and declared he will build a wall between the two countries. Predictably, these protectionist measures are raising concerns in the markets that US economic growth could drop if the US takes an isolationist stance towards global trade, and such a stance could sour market sentiment and lead to volatility in the markets. If America’s trade partners choose to retaliate against Trump’s moves, this could lead to a trade war in which there are no winners. 

Thursday (January 26)

  • 8:30 US Unemployment Claims. Estimate 247K. Actual 259K
  • 8:30 US Goods Trade Balance. Estimate -64.5B. Actual -65.0B
  • 8:30 US Preliminary Wholesale Inventories. Estimate 0.9%. Actual 1.0%
  • 9:45 US Flash Services PMI. Estimate 54.4. Actual 55.1
  • 10:00 US New Home Sales. Estimate 585K. Actual 536K 
  • 10:00 US CB Leading Index. Estimate 0.5%. Actual 0.5%
  • 10:30 US Natural Gas Storage. Estimate -121B. Actual -119B

Upcoming Key Releases

Friday (January 27)

  • 8:30 US Advance GDP. Estimate 2.1%
  • 8:30 US Core Durable Goods Orders. Estimate 0.5%
  • 10:00 Revised UoM Consumer Sentiment. Estimate 98.2

*All release times are GMT

*Key events are in bold

WTI/USD for Thursday, January 26, 2017

WTI/USD January 26 at 12:30 EST

Open: 53.00 High: 53.47 Low: 52.56 Close: 53.21

WTI USD Technical

S3 S2 S1 R1 R2 R3
40.57 46.54 52.22 58.32 65.05 72.99

WTI/USD showed little movement in the Asian and European sessions. The pair has posted considerable gains in North American trade

  • 52.22 remains a weak support line
  • 58.32 is the next resistance line
  • Current range: 52.22 to 58.32

Further levels in both directions:

    • Below: 52.22, 46.54, 40.57 and 33.22
    • Above: 58.32, 65.05 and 72.99

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.