West Texas Crude Slide Continues as Saudi Arabia Hikes Production

West Texas crude has dropped below $48 on Tuesday, as the slide against the dollar continues. In North American trade, WTI crude futures are trading at $47.33. Brent Crude has dropped to $50.51, as the Brent premium has widened to $3.18. On the release front, US PPI dipped to 0.3%, above the estimate of 0.1%. Wednesday will be busy, as the US publishes CPI and retail sales reports. As well, the Federal Reserve is widely expected to raise the benchmark rate to 0.75 percent.

Oil prices continue to head downwards, as West Texas crude plunged 8.7 percent last week and dipped below the $47 level earlier on Tuesday. This was in response to reports that Saudi Arabia has increased oil production above 10 million barrels a day, raising concerns about a global oil glut. WTI crude is also under strong pressure as US crude stockpile reports continue to point to surpluses. Last week, Crude Inventories soared to 8.2 million barrels, well above the forecast of 1.1 million. US crude has posted surpluses in 11 of the past 12 weeks, reflective of increasing US shale production. Most of the surpluses have been much higher than the forecasts, as the markets continue to underestimate the level of crude stockpiles. The ongoing surplus has dampened OPEC’s hopes of raising prices, as the cartel cut production levels at the beginning of January. Compliance with the agreement stands at an impressive 94% and OPEC had high hopes of pushing crude to $60 or more, but oil prices continue to lose ground in 2017.

US Shale Harming Output Deals

Strong US employment numbers in February have cemented a rate hike by the Federal Reserve on Wednesday. Nonfarm payrolls sparkled in February, as the indicator jumped to 235 thousand, easily beating the estimate of 196 thousand. Wage growth climbed 2.6% compared to February 2016, while the participation rate edged up to 63.0%, up from 62.9%. These numbers make it a virtual certainty that the Fed will raise rates by a quarter-point on Wednesday. Although a rate hike has been priced in by the markets at 93%, there have been disappointments in the past, so a rate move will likely give the dollar a boost against its major rivals. The solid job numbers also give President Trump a much-needed boost. Trump is under pressure to present an economic agenda, but the markets won’t mind giving him some additional breathing room, with the economy performing so well.

WTI/USD Fundamentals

Tuesday (March 14)

• 8:30 US PPI. Estimate 0.1%. Actual 0.3%
• 8:30 US Core PPI. Estimate 0.2%. Actual 0.3%

Upcoming Key Events

Wednesday, March 15

• 8:30 US CPI. Estimate 0.0%
• 8:30 US Core CPI. Estimate 0.2%
• 8:30 US Core Retail Sales. Estimate 0.1%
• 8:30 US Retail Sales. Estimate 0.2%
• 14:00 US FOMC Economic Projections
• 14:00 US FOMC Statement
• 14:00 US Federal Funds Rate. Estimate <1.00%
• 14:00 US FOMC Press Conference

*All release times are GMT

*Key events are in bold

WTI/USD for Tuesday, March 14, 2017

WTI/USD March 14 at 11:20 EST

Open: 48.27 High: 48.79 Low: 47.10 Close: 47.33

WTI USD Technical

WTI/USD was flat in the Asian session. The pair posted considerable losses in European trade and has posted slight losses in the North American session

• 46.54 is providing weak support
• 52.22 is the next resistance line
• Current range: 46.54 to 52.22

Further levels in both directions:

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

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