WTI/USD – Crude Slide Continues Despite Small Drawdown in Supplies

US crude have posted considerable losses on Wednesday, continuing the downward trend seen on Tuesday. In the North American session, WTI/USD futures are trading at $43.90 per barrel. Brent futures are trading at $46.22, as the Brent premium stands at $2.32. In economic news, it’s another quiet day in the US. Crude Oil Inventories surprised the markets with a second consecutive drawdown, although the decline was only 0.6 million barrels. US Import Prices dropped 0.1%, its first decline in six months. There are a host of key events on Thursday, highlighted by retail sales and unemployment claims.

Crude Oil Inventories posted a slight drawdown of 0.6 million, well short of the forecast of a surplus of 2.8 million. This reading follows the shock reading last week of -14.5 million, compared to the forecast of +0.6 million. Oil prices 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.

With a September rate hike unlikely but still on the table, the markets have been paying close attention to comments from FOMC members in connection with the Fed’s monetary policy. 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 last week, 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 with a week to go before a crucial Fed policy meeting. The markets have had few fundamental cues to work with so far this week, but that will change on Thursday, as the US releases retail sales, PPI, the Philly Fed Manufacturing Index and unemployment claims. If these numbers are stronger than expected, speculation about a September hike will rise and the US dollar could gain ground.

WTI/USD Fundamentals

Wednesday (September 14)

• 8:30 US Import Prices. Estimate -0.2%. Actual +0.1%
• 10:30 US Crude Oil Inventories. Estimate +2.8M. Actual -0.6M

Upcoming Key Events

Thursday (September 15)

• 8:30 US Core Retail Sales. Estimate 0.3%
• 8:30 US PPI. Estimate 0.1%
• 8:30 US Philly Fed Manufacturing Index. Estimate 1.1
• 8:30 US Retail Sales. Estimate -0.1%
• 8:30 US Unemployment Claims. Estimate 262K

*Key events are in bold

*All release times are EDT

WTI/USD for Wednesday, September 14, 2016

WTI/USD September 14 at 11:20 EDT

Open: 45.10 High: 45.33 Low: 43.86 Close: 43.90

WTI USD Technical

• WTI/USD was flat in the Asian and European sessions. The pair has posted considerable losses in the North American session
• 43.45 is a weak support line. It could break in the North American session
• 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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