WTI/USD – US Crude Steady as Crude Inventories Dive

US crude has edged lower in the Thursday session. In North American trade, US crude futures are trading at $52.95. Brent crude futures are trading at $56.22, as the Brent premium stands at $3.27. In the US, Crude Oil Inventories dropped 7.1 million barrels, marking the largest decline since September. On the employment front, ADP Nonfarm Employment Change disappointed with a reading of 153 thousand, well off the forecast of 171 thousand. There was better news from unemployment claims, which dropped to a 7-week low at 235 thousand. The ISM Non-Manufacturing PMI improved to 57.2, its highest level since October 2015. US employment numbers will be in the spotlight on Friday, with three releases – Nonfarm Payrolls, Average Hourly Earnings and the Unemployment Rate.

The Federal Reserve was on center stage on Wednesday, as the Fed released the minutes of its policy meeting in December. At the meeting, the Fed raised rates by a quarter point for the only time in 2016. The minutes indicated that FOMC members are concerned about higher inflation levels, given the “prospects for more expansionary fiscal policies in the coming years”. This is a clear reference to president-elect Trump’s plans to increase fiscal spending and cut taxes, which would likely result in higher inflation, something the Fed  hasn’t had to deal with for years. Still, policymakers appear unchanged in their view that gradual rate hikes remains an appropriate monetary policy. The Fed members acknowledged that there is “considerable uncertainty” regarding future fiscal and economic programs. Many analysts are predicting another rate hike in June, but this could of course change, depending on how the effect that Trump’s economic platform has on the US economy. The Fed will need at least a few months to digest the economic stance of the incoming administration, and the uncertainty mentioned in the Fed minutes could lead to volatility in the markets in what promises to be an interesting first quarter of 2017.

Will 2017 be the year of lower production and higher prices for crude? Crude Inventories posted a huge drawdown of 7.1 million barrels, although crude prices haven’t moved higher in response. With the markets waiting to see if promised OPEC production cuts reduce global oversupply of crude, we could see further volatility from crude early in the year. In December, OPEC surprised the markets as members agreed to cut or limit production levels. This was quickly followed by a deal with Russia and other oil producers to cut production. These reductions took effect on January 1, but lower production is by no means a sure thing, as oil producers have often cheated on their production quotas in the past.

Dollar Bleeds on Fed Uncertainty

OPEC Members Exported at Record Levels Ahead of Production Cut Deal

WTI/USD Fundamentals

Thursday (January 5)

  • 7:30 US Challenger Job Cuts. Actual 42.4%
  • 8:15 US ADP Nonfarm Employment Change. Estimate 171K. Actual 153K
  • 8:30 US Unemployment Claims. Estimate 262K. Actual 235K
  • 9:45 US Final Services PMI. Estimate 53.4. Actual 53.9
  • 10:00 US ISM Non-Manufacturing PMI. Estimate 56.6. Actual 57.2
  • 10:30 US Natural Gas Storage. Estimate -97B. Actual -49B
  • 11:00 US Crude Oil Inventories. Estimate -1.8M. Actual -7.1M

Friday (January 6)

  • 8:30 US Average Hourly Earnings. Estimate 0.3%
  • 8:30 US Nonfarm Employment Change. Estimate 175K
  • 8:30 US Unemployment Change. Estimate 4.7%

*All release times are EST

* Key events are in bold

WTI/USD for Thursday, January 5, 2017

WTI/USD January 5 at 11:35 EST

Open: 53.23 High: 54.11 Low: 53.05 Close: 52.95

WTI USD Technical

S3 S2 S1 R1 R2 R3
40.57 46.54 52.22 58.32 65.05 72.99
  • WTI/USD was flat in the Asian session. The pair posted small gains in European trade but has reversed directions in the North American session
  • 52.22 remains a weak support level
  • 58.32 is the next resistance line

Further levels in both directions:

  • Below: 52.22, 46.54, 40.57 and 33.22
  • Above: 58.32, 65.05 and 72.99

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.
Kenny Fisher

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