West Texas Crude Recovers After Losses from US Inventories

West Texas crude has posted gains on Thursday, erasing losses which marked the Wednesday session. In North American trade, WTI futures are trading at $51.71. Brent crude futures are trading at $54.93, as the Brent crude premium remains steady at $3.22. On the release front, unemployment claims dropped to 234 thousand, well below the forecast of 251 thousand. The week wraps up with more employment data, as the US releases three key employment indicators on Friday – Nonfarm Employment Change, Average Hourly Earnings and the unemployment rate.

US crude prices continue to trade just above the $50 level, as the tug-of-war between OPEC and the US producers continues. The glut of oil worldwide remains as higher US production has offset OPEC cuts. US Crude Inventories continue to show surpluses, most of which have been higher than the forecast. This was the case again last week, with US crude inventories posting a strong gain of 1.6 million, surprising the markets which had forecast a decline. The indicator has posted 12 surpluses in the last 13 weeks, which has helped keep a lid on higher oil prices throughout 2017.

The Federal Reserve was back in the spotlight on Wednesday, as it released the minutes of its March policy meeting. At that meeting, the Fed raised rates for the first time in 2017. However, the dovish rate statement disappointed the markets, triggering broad losses for the US dollar. In the minutes, policymakers noted upside risk to the US economy, but remained divided on whether inflation will rise to the Fed target of 2.0%. Most policymakers were in favor of taking steps to trim the $4.5 trillion balance sheet, which has ballooned since the Fed implemented its aggressive quantitative easing program back in 2008. So what’s next for the Fed? According to the CME’s Fed Watch, the odds of a rate hike at the May meeting are just 5 percent, while the likelihood of a rate hike in June stand at 63 percent. Fed policymakers appear divided on how many more times the Fed will press the rate trigger. Last week, FOMC member Eric Rosengren called for three more hikes, saying the Fed should raise rates in June, September and December. Rosengren said that employment and inflation levels were close to the Fed’s targets, and that three additional hikes were needed in order to prevent the US economy from overheating. However, a majority of FOMC members are in favor of just two more hikes this year.

Oil Lower After Surprise Rise in US Inventories

Inventories Wrong-foot Crude

WTI/USD Fundamentals

Wednesday (April 6)

• 7:30 US Challenger Job Cuts. Actual -2.0%
• 8:30 US Unemployment Claims. Actual 251K. Actual 234K
• 10:30 US Natural Gas Storage. Estimate 10B. Actual 2B

Friday (April 7)

• 8:30 US Average Hourly Earnings. Estimate 0.2%
• 8:30 US Nonfarm Employment Change. Estimate 174K
• 8:30 US Unemployment Rate. Estimate 4.7%

*All release times are GMT

*Key events are in bold

WTI/USD for Thursday, April 6, 2017

WTI/USD April 6 at 13:20 EST

Open: 50.88 High: 51.77 Low: 50.81 Close: 51.71

WTI USD Technical

WTI/USD was flat in the Asian session. The pair posted slight gains in both the European and North American sessions

• 46.54 is providing support
• 52.22 remains a weak 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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