US Crude Higher as Yellen Says Fed on Track to Raise Rates

US crude futures have posted gain on Friday, reversing the downward trend which marked the Thursday session. US crude is trading at $38.71 per barrel in the North American session. Brent crude futures are trading at $40.77, as the Brent premium has increased to $2.06. On the release front, today’s sole economic indicator is Wholesale Sales, with the markets expecting a decline of 0.2%. We’ll also hear from two FOMC members, Esther George and William Dudley, who will deliver speeches later in the day.

After Janet Yellen’s cautious speech in New York last week, the Federal Reserve followed suit on Wednesday, as the March meeting minutes were dovish. The minutes indicated that the Fed is unlikely to raise rates before June at the earliest. Although some policymakers expressed approval for a rate hike in April, others expressed concern about the risks to the US economy posed by global economic conditions. There was a split amongst members as to whether the recent pickup in inflation was sustainable. Many Fed members were worried about the lack of options available to the Fed since rates remain close to zero. This could result in significant impact on the currency markets, since the dollar could strengthen if the Fed is unable to implement effective easing measures. The minutes appear to be a validation of Janet Yellen’s remarks last week, which were very dovish and dampened growing enthusiasm about a rate hike as early as April. What can we expect from the Fed in 2016? There is a strong likelihood that the Fed will raise rates twice during the year, but the timetable of any moves is unclear. At a panel discussion on Thursday, Yellen said she did not consider the December rate hike a mistake and said that the Fed was monitoring the economy very carefully. Yellen took note of the robust US labor market, and said the the Fed remains on track to gradually raise interest rates if the economy continues to expand as expected. Crude has posted gains after Yellen’s comments.

US crude prices jumped 4.9 percent on Wednesday, boosted by an EIA report that crude stockpiles declined 4.9 million. This sharp slide surprised the markets, which had projected a surplus of 3.1 million. At the same time, this was only the second decline in 2016 reported by the EIA, which measures US crude stockpiles on a weekly basis. The US and the rest of the world remains awash in a huge surplus of oil, and oil producers will meet in Doha on April 17 in an attempt to set production limits and stabilize oil prices. However, previous attempts to cap output have failed, and it’s doubtful if we’ll see any history made at the upcoming meeting. Senior officials are putting a positive spin on the gathering, but many OPEC nations have decided not to attend, and Iran, which was recently given the green light to resume oil exports, has announced that it plans to raise its output.

WTI/USD Fundamentals

Friday (April 8)

• 00:15 FOMC Member Esther George Speaks
• 8:30 FOMC Member William Dudley Speaks
• 10:00 US Wholesale Inventories. Estimate -0.2%

WTI/USD for Friday, April 8, 2016

WTI/USD April 8 at 8:00 DST

Open: 37.26 Low: 37.26 High: 38.73 Close: 38.71

WTI/USD Technical

• WTI/USD has posted gains in the Asian and European sessions
• There is support at the round number of 40.00
• 37.75 has switched to a support role following gains by WTI/USD on Friday

Further levels in both directions:

• Below: 37.75, 35.09, 32.22 and 27.55
• Above: 40.00, 43.45 and 46.69

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