WTI/USD – US Crude Pushes to $50 as Crude Stockpiles Dip

US crude has posted considerable gains in the Wednesday session. In North American trade, WTI/USD futures are trading at $49.77 per barrel. Brent futures are trading at $50.35, as the Brent premium stands at $0.62. On the release front, US New Home Sales dropped to 593 thousand, short of the forecast of 601 thousand. On Thursday, the US will release two key events – Core Durable Goods Orders and Unemployment Claims.

US crude inventories surprised yet again with a drawdown on Wednesday. The indicator dropped 0.7 million barrels, compared to an estimate of a 0.6 million surplus. Predictably crude prices rose after the release, which points to continuing strong demand for oil. Crude inventory releases continue to confound the markets. The indicator has posted declines in seven of the past eight weeks, but the markets have forecast surpluses for each of those releases. On the international oil scene, Russian Energy Minister Alexander Novak said on Friday that an oil output agreement was needed in order to stabilize oil prices. OPEC members surprised analysts by reaching a tentative agreement to cap output back in September and are holding another meeting on November 30. Previous attempts by OPEC to set limits on each member have failed, so it’s questionable if the cartel will have more success this time around. Still, the fact that oil exporters are making concentrated efforts to reach an agreement is likely to continue to cause volatility in oil prices.

With market anticipation of a US rate hike growing, the odds of a rate hike in December continue to rise. The CME Fed Watch has priced in a December rate hike at 72%. The prospect of a US rate hike for the first time in over a year has bolstered the US dollar against its rivals, including the Japanese yen. The US economy remains strong, buoyed by a labor market that is close to capacity, with unemployment at a healthy 5.0%. Inflation levels remain low and are unlikely to show much improvement in the next few months. Although the Fed would prefer stronger inflation levels, other economic indicators remain strong enough such that the lack of inflation is unlikely to be the critical factor in the Fed rate decision. The Fed will also hold a policy meeting in early November, but it’s unlikely to make any rate moves just before the US presidential election.

WTI/USD Fundamentals

Wednesday (October 26)

• 8:30 US Goods Trade Balance. Estimate -60.6B. Actual -56.1B
• 8:30 US Preliminary Wholesale Inventories. Estimate 0.1%. Actual 0.2%
• 9:45 US Flash Services PMI. Estimate 52.4. Actual 54.8
• 10:00 US New Home Sales. Estimate 601K. Actual 593K
• 10:30 US Crude Oil Inventories. Estimate +0.7M. Actual -0.6M 

Upcoming Key Events

Thursday (October 27)

• 8:30 US Core Durable Goods Orders. Estimate 0.2%
• 8:30 US Unemployment Claims. Estimate 261K

*All release times are EDT

*Key events are in bold

WTI/USD for Wednesday, October 26, 2016

WTI/USD October 26 at 11:20 EDT

Open: 49.28 High: 50.09 Low: 48.87 Close: 49.77

WTI USD Technical

WTI/USD showed limited movement in the Asian and European sessions. The pair has posted strong gains in the North American session

• 46.69 is providing support
• 50.13 is a weak resistance line

Further levels in both directions:

• Below: 46.69, 43.45 and 38.38
• Above: 50.13, 53.50, 59.69 and 65.49

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