US crude futures have posted slight gains on Wednesday, trading at $34.30 a barrel in the North American session. Brent crude futures are trading at $36.86. On the economic front, ADP Nonfarm Payrolls improved to 214 thousand, easily beating the estimate of 185 thousand. Crude Oil Inventories posted a huge surplus of 10.4 million, crushing the estimate of 2.5 million. On Thursday, there are two key releases – Unemployment Claims and ISM Non-Manufacturing PMI.
Crude oil prices have punched above $34 and are currently at their highest level since early January. This is largely due to market sentiment that the crash in prices may have “bottomed out”, as crude has been climbing steady over the past three weeks. However, the huge surplus of crude continues to dwarf demand and may be with us for quite some time, which would weigh on the commodity. Perhaps underscoring this point, Crude Oil Inventories surged last week to 10.4 million, the largest surplus recorded in almost one year. Global demand for oil has decreased in recent months, sparked by the Chinese slowdown. The US economy has also softened, resulting in less demand for oil and exacerbating the tremendous collapse in oil prices.
Weaker US fundamentals in early 2016 have dampened expectations about a rate hike by the Federal Reserve in March, as Fed policymakers have stated that economic conditions will have to improve before rates move higher. Some economists have predicted that the Fed will hold off from any further hikes until 2017. Meanwhile, January reports from the US housing sector are raising concerns. Housing Starts and Building Applications fell in January, and New Home Sales and Pending Home Sales followed suit, missing expectations. Activity in the housing sector is closely monitored by analysts, as a decrease in home building can have a negative impact on other sectors of the economy. The US manufacturing sector has also struggled, but there was positive news last week as Core Durable Goods Orders and Durable Goods Orders were much stronger than expected in January.
Wednesday (March 2)
- 8:15 US ADP Non-Farm Employment Change. Estimate 185K. Actual 214K
- 10:30 US Crude Oil Inventories. Estimate 2.5M. Actual 10.4M
- 14:00 US Beige Book
Upcoming Key Events
Thursday (March 3)
- 8:30 US Unemployment Claims. Estimate 271K
- 10:00 US ISM Non-Manufacturing PMI. Estimate 49.8 points
*Key events are in bold
*All release times are EST
WTI/USD for Wednesday, March 2, 2016
WTI/USD March 2 at 12:10 EST
Open: 33.86 Low: 33.54 High: 35.12 Close: 34.30
- WTI/USD was flat in the Asian session. The pair posted slight losses in the European session but then recovered. In North American trade, the pair has posted slight gains.
- There is weak resistance at 35.09. This line was tested earlier and could see further action in the North American session
- 32.22 is providing support
Further levels in both directions:
- Below: 32.22, 30.00, 26.64 and 22.88
- Above: 35.09, 37.75 and 40.00