WTI/USD – Crude Posts Gains as Stockpiles Decline

US crude has edged higher on Wednesday, buoyed by upward movement in the North American session. Currently, WTI/USD futures are trading at $46.67. Brent crude has improved to $49.65, as the Brent premium stands at $2.98. On the release front, Crude Oil Inventories was much weaker than expected, posting a sharp decline of 2.5 million barrels. On Thursday, the US will release two key events – Philly Fed Manufacturing Index and Unemployment Claims.

The oil rally continues, as US crude is trading close to the $47 line, a level not seen since mid-July. Crude has jumped 5.0% this week alone, and is enjoying a superb month of August, with gains of 12.8%. The commodity picked up more ground on Wednesday, as Crude Oil Inventories posted a sharp decline of 2.5 million, compared to a forecast of a 0.3 million gain. It marked the sharpest decline in crude stockpiles in 5 weeks. Oil prices have also been boosted by reports that oil producers are discussing a curb on output in order to stabilize oil prices. OPEC members are planning to meet in Algiers in late September, and if an agreement to cap production is reached, supplies would be reduced and crude prices would move upwards. However, these oil summits have usually ended without an agreement, as was the case at an OPEC meeting earlier this year. Iran, which has returned as a major producer after years of sanctions, scuttled the meeting and is unlikely to be agreeable to any cuts in production. Still, a number of producers have expressed a willingness to discuss a ceiling output, and we’re likely to see volatility from crude leading up to the September meeting.

US inflation numbers remain anemic, a persistent sore point in a generally strong US economy. The lack of inflation was underscored on Tuesday by consumer inflation reports for July. CPI posted a weak reading of 0.0%, its worst showing in five months. Core CPI dropped to 0.1%, shy of the estimate of 0.2%. Wednesday’s highlight is the Federal Reserve minutes, which will provide details of the Fed’s July policy meeting. However, the minutes could prove to be a non-event, since there have been a host of key releases since the July meeting. Problem is, the data is pointing in all directions, making it a tricky task to try and figure out when the Fed might raise interest rates. After a soft GDP report in late July, nonfarm payrolls put in a stellar performance. However, this was followed by weak retail sales and CPI numbers. Bottom line? A September hike is virtually off the table, while the odds of a December hike are pegged at 50/50. However, Fed policymakers will be hesitant to raise rates if key indicators, particularly inflation levels, remain close to zero.

WTI/USD Fundamentals

Wednesday (August 17)

  • 10:30 US Crude Oil Inventories. Estimate 0.3M. Actual -2.5M
  • 13:00 FOMC Member James Bullard Speaks
  • 14:00 US FOMC Meeting Minutes
  • 19:50 Japanese Trade Balance. Estimate 0.14T

Thursday (August 18)

  • 8:30 US Philly Fed Manufacturing Index. Estimate 1.4
  • 8:30 US Unemployment Claims. Estimate 269K

*Key events are in bold

*All release times are EDT

WTI/USD for Wednesday, August 17, 2016

WTI/USD August 17 at 11:40 EDT

Open: 46.33 High: 46.65 Low: 45.90 Close: 46.67

WTI USD Technical

S3 S2 S1 R1 R2 R3
35.25 39.32 43.45 46.69 50.13 53.50
  • WTI/USD showed limited movement in the Asian and European sessions. The pair has posted gains North American trade
  • 46.69 was tested earlier in support and is under strong pressure
  • 43.45 is providing support

Further levels in both directions:

  • Below: 43.45, 39.32, 35.25 and 30.55
  • Above: 46.69, 50.13 and 53.50

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.

Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.