W. Texas Crude Slips Below $53 on Swelling Crude Inventories

West Texas crude has posted losses in the Thursday session. In North American trade, WTI crude futures are trading at $52.81. Brent crude futures have dipped to $55.26, as the Brent premium trades at $2.45. On the release front, US unemployment claims dropped sharply. The indicator plunged to 223 thousand last week, the fewest claims since March 1973. On Friday, the US releases ISM Non-Manufacturing PMI, and the markets will be listening closely as Janet Yellen and three other FOMC members deliver speeches.

As Crude Inventories continue to post surpluses, W. Texas Crude remains under pressure. On Thursday, crude dropped below the $53 line for the first time since February 20. On Wednesday, Crude Inventories posted an eighth consecutive surplus, but this time the markets got it right, and the forecast of 1.5 million barrels was right on the money. The string of gains points to a swelling surplus of US crude. This is a result of a sharp increase in US shale drilling, which has offset lower production levels from OPEC and Russia. The OPEC deal, which was supposed to stabilize production levels and raise oil prices, came into effect on January 1. Although compliance has been very high, oil prices have failed to break out and move higher than the $55 level in 2017.

There was plenty of excitement ahead of President Trump’s maiden speech to Congress on Tuesday, which many analysts expected would be a market-mover. In the end, however, the speech was a dud in terms of market movement. The lack of response was due to a speech that was glaringly short on specifics. Trump “talked a good talk”, promising “massive” tax relief for the middle class as well as corporate tax cuts. However, he failed to provide details or even timelines on tax reform or infrastructure spending, two themes which he has often discussed since the election campaign. Trump stated that he will ask Congress to approve legislation for $1 trillion in infrastructure spending, “financed through both public and private capital”. Analysts noted that although Trump touched on the protectionist theme, such as the trade imbalance with China, his tone was less belligerent than we’ve seen in the past. Recent flare-ups with Japan, Mexico and China have triggered volatility in the financial markets, so a less belligerent Trump, even if temporary, could lead to calmer markets.

WTI/USD Fundamentals

Thursday (March 2)

• 8:30 US Unemployment Claims. Estimate 243K. Actual 223K
• 10:30 US Natural Gas Storage. Estimate -5B

Upcoming Key Events

Friday (March 3)

• 10:00 US ISM Non-Manufacturing PMI. Estimate 56.5
• 13:00 Federal Reserve Chair Janet Yellen Speech

*All release times are GMT

*Key events are in bold

WTI/USD for Thursday, March 2, 2017

WTI/USD March 2 at 13:35 EST

Open: 53.27 High: 53.80 Low: 52.68 Close: 52.81

WTI USD Technical

WTI/USD was flat in the Asian session. The pair has posted slight losses in the European and North American sessions

• 52.22 remains a weak support level and could be tested in the North American session
• 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

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