US Crude on the Move, Flirting With $40

US crude futures have marched higher on Thursday, continuing the trend we saw on Wednesday. US Crude is trading at $39.84 a barrel in the North American session. Brent crude futures are trading at $41.20 as Brent’s premium has narrowed to $1.36. In economic news,  the Philly Fed Manufacturing Index jumped 12.4 points, crushing the estimate of -1.4 points. However, employment data was soft, as both Unemployment Claims and JOLTS Job Openings both dropped compared to their previous releases.

On Thursday, crude touched the psychologically important level of $40, and the commodity has surged 3.7% in the past two days. Crude started this rally at the conclusion of the Federal Reserve meeting on Wednesday, as the Fed did not raise interest rates. Crude prices also gained ground on a soft crude inventory release, as well as a report that Qatar will host a meeting of oil producer nations in mid-April to discuss freezing outputs. Previous efforts at capping production have not succeeded, with producers unable to reach agreement. Iran is a monkey wrench in the equation, as the country recently tripled its production and is not interested in cutting back on output. The country was shut out of international markets until January, due to international sanctions, and is eager to regain its status as a major oil exporter.

There were no surprises from the widely-anticipated Federal Reserve rate announcement on Wednesday. The Fed remained on the sidelines and did not raise interest rates at its policy meeting on Wednesday, maintaining the benchmark rate at 0.25%. The Fed statement noted that the US economy remains vulnerable to an uncertain global economy, but expects to raise rates later in the year due to moderate growth and “strong job gains”. The statement was dovish in tone, a clear departure from the December meeting, when the Fed raised rates for the first time in nine years and talked about four rate hikes over the course of 2016. In just a short three months, global demand has weakened, precipitated by the Chinese slowdown, and US numbers have cooled in comparison to the economy’s torrid pace in the second half of 2015. If inflation and employment numbers push higher in next several months, a rate hike in mid-2016 seems a good bet.

WTI/USD Fundamentals

Thursday (March 17)

• 8:30 US Philly Fed Manufacturing Index. Estimate -1.4. Actual +12.4 points
• 8:30 US Unemployment Claims. Estimate 267K. Actual 265K
• 8:30 US Current Account. Estimate -117B. Actual -125B
• 10:00 US JOLTS Job Openings. Estimate 5.57M. Actual 5.54M
• 10:00 US CB Leading Index. Estimate 0.2%. Actual 0.1%
• 10:30 US Natural Gas Storage. Estimate -9B. Actual -1B 

*Key events are in bold

*All release times are DST

WTI/USD for Wednesday, March 16, 2016

WTI/USD March 16 at 12:00 DST

Open: 38.69 Low: 38.46 High: 40.08 Close: 39.84

WTI/USD Technical

• WTI/USD posted gains in the Asian session. The pair showed choppiness in the European session and has resumed upward movement in North American trade.
• 37.75 is providing support
• The round number of 40.00 was tested earlier in resistance and remains under pressure

Further levels in both directions:

• Below: 37.75, 35.09, 32.22 and 30.00
• Above: 40.00, 43.45 and 46.69

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.