W. Texas Crude Drops Below $49 on Crude Inventories Aftershock

West Texas crude has posted sharp losses in the Thursday session. In North American trade, WTI crude futures are trading at $48.70. Brent Crude has slipped to $51.69, as the Brent premium stands at $2.99. On the release front, unemployment claims climbed to 243 thousand, higher than the forecast of 239 thousand. On Friday, employment numbers will again be in focus, as the US releases three key indicators – Nonfarm Payrolls, Average Hourly Earnings and the unemployment rate. Traders should be prepared for some volatility in crude prices during the North American session.

West Texas crude prices have nosedived this week, declining 7.7 percent. On Thursday, WTI/USD dipped below the $49 level, the first time that has occurred since the end of November. The commodity has responded negatively to yet another surplus in US crude stockpiles. Last week, the surplus soared to 8.2 million barrels, well above the forecast of 1.1 million. US crude has posted surpluses in 11 of the past 12 weeks, reflective of increasing US oil production. Most of the surpluses have been much higher than the forecasts, as the markets continue to underestimate the level of crude stockpiles. The ongoing surplus has put a damper on OPEC’s hopes to raise prices, as the cartel has cut production levels since the first of January. Although compliance with the agreement stands at 94% and OPEC had high hopes of pushing crude to $60 or more, US crude prices have failed to break out and push past the $55 level in 2017.

Oil Drops Below $50

After raising rates in December, the Fed appears ready to make a March move. The odds of a March hike continue to climb, and are currently at 88% percent, according to the CME Group. Fed policymakers have been dropping hints of a March move, and a red-hot labor market and higher inflation levels present further arguments in favor higher rates. Earlier in the year, the Fed had said that it wanted to wait until it had a clearer idea of President Trump’s economic policy before it tightened monetary policy. However, Trump has not backed up his promises to reform the tax code and increase fiscal spending with any details. Some Fed policymakers wanted to raise rates earlier this year, so Fed Chair Yellen is under pressure to make a move, and it appears virtually certain that the Fed will raise rates by a quarter-point on March 15.

Thursday (March 9)

• 7:30 US Challenger Job Cuts. Actual -40.0%
• 8:30 US Unemployment Claims. Estimate 239K. Actual 243K
• 8:30 US Import Prices. Estimate 0.1%. Actual 0.2%
• 10:30 US Natural Gas Storage. Estimate -59B
• 13:01 US 30-y Bond Auction

Upcoming Key Events

Friday (March 10)

• 8:30 US Average Hourly Earnings. Estimate 0.3%
• 8:30 US Nonfarm Employment Change. Estimate 185K
• 8:30 US Unemployment Rate. Estimate 4.7%

*All release times are GMT

*Key events are in bold

WTI/USD for Thursday, March 9, 2017

WTI/USD March 9 at 13:35 EST

Open: 50.49 High: 50.84 Low: 48.68 Close: 48.70

WTI USD Technical

WTI/USD was flat in the Asian session. The pair posted sharp losses in the European session and has been choppy in the North American trade

• 46.54 is providing support
• 52.22 has switched to a resistance role
• Current range: 46.54 to 52.22

Further levels in both directions:

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

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