WTI/USD – US Crude Dips as IEA Lowers Demand Forecast

After a slow start to the week, US crude have posted strong gains in Tuesday’s North American session. Currently, WTI/USD futures are trading at $44.91 per barrel. Brent futures are trading at $47.11, as the Brent premium has narrowed to $2.20. In economic news, it’s another quiet day in the US, with no major events on the schedule. NFIB Small Business Index came in at 94.4 points, short of the forecast of 94.9 points. On Wednesday, we’ll get a look at Crude Inventories.

Oil prices have headed downwards on Tuesday, following an International Energy Agency (IEA) report that the oil oversupply could extend into the middle of 2017. This assessment surprised the markets, as the IEA veered sharply from its report a month ago, when it projected that the market would not show any surplus for the rest of the year. The revised IEA report comes on the heels of an OPEC report on Monday, which projected the oil glut to continue into 2017 due to an increase in production from non-OPEC members. The markets will now shift focus to US crude inventory report, which shocked the markets late last week with a reading of -14.5 million barrels. US crude climbed to $47.50 after that release, but has since retracted below $45.

With the Federal Reserve holding a crucial policy meeting on September 21, the markets have been paying even closer attention to recent comments from Fed policymakers. On Monday, FOMC member Lael Brainard sounded cautious, saying it would be prudent to maintain a loose monetary policy. Brainard noted global uncertainties and weak inflation as reasons for the Fed not to rush into raising rates. This dovish message was in marked contrast to remarks from FOMC member Eric Rosengren on Friday, who came out in support of a rate hike, without providing a timeline. Rosengren said that “tightening is likely to be appropriate”, and went as far as to say that the US economy could overheat if the Fed didn’t act soon. These mixed messages certainly haven’t clarified matters, leaving markets players in the dark as to the Fed’s monetary plans. However, they have led to plenty of movement in the odds of a rate hike, which moved higher after Rosengren’s speech, only to drop following Brainard’s comments. The likelihood of a September hike has dipped to 15%, while the odds of a December rate are down to 45%. The markets will have few fundamental cues to work with until Thursday and Friday, when the US will release retail sales, CPI and consumer confidence numbers. If these numbers are stronger than expected, the odds of a rate hike next week will move higher, and the dollar could make headway against its rivals.

WTI/USD Fundamentals

Tuesday (September 13)

• 6:00 US NFIB Small Business Index. Estimate 94.9. Actual 94.4
• 13:01 US 30-year Bond Auction
• 14:00 US Federal Budget Balance. Estimate -98.0B

Wednesday (September 14)

• 10:30 US Crude Oil Inventories

*Key events are in bold

*All release times are EDT

WTI/USD for Tuesday, September 13, 2016

WTI/USD September 13 at 11:40 EDT

Open: 46.09 High: 46.10 Low: 44.77 Close: 44.92

WTI USD Technical

• WTI/USD was flat in the Asian session. The pair has posted slight losses in the European and North American sessions
• 43.45 is providing support
• There is resistance at 46.49

Further levels in both directions:

• Below: 43.45, 38.38 and 32.33
• Above: 46.69, 50.13, 53.50 and 59.69

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