WTI/USD – US Crude Oil Rises as Crude Inventories Slide

US Crude has posted considerable gains on Wednesday, continuing the upward trend we saw in the Tuesday session. US crude futures are trading at $49.16 per barrel in the North American session. Brent crude is trading at $49.82, as the Brent premium is steady at $0.66. On the release front, Crude Inventories posted a sharp decline of 4.1 million, much weaker than expected. Pending Home Sales plunged 3.7%, much worse than expected. US Personal Spending posted a gain of 0.4%, matching the forecast. On Thursday, the US releases Unemployment Claims.

US crude continues to move higher, buoyed by a sharp decline in Crude Oil Inventories. The indicator plunged 4.1 million barrels, compared to  an estimate of 2.3 million. US crude stockpiles have declined for six straight weeks, and last week’s drop was particularly large. This could be pointing to tightening domestic supplies, which could result in crude prices moving even higher. At the same time, if US crude climbs past $50, we could see more US shale producers enter the market, which would increase supply and dampen any upward price movement.

Earlier in the week, GDP was revised upwards in the first quarter. Final GDP for the first quarter posted a gain of 1.1%, above the estimate of 1.0%. This reading was stronger than the Preliminary GDP reading of 0.8%. Although the upward revision was welcome news, the revised GDP report marked the weakest gain in a year. On the consumer front, CB Consumer Confidence impressed by climbing to 98.0 points, easily beating the forecast of 93.2 points. Is US consumer confidence strengthening? It’s not clear, as last week’s UoM Consumer Sentiment report dropped to 93.4 points and missed expectations. On Wednesday, US personal spending was lukewarm, gaining 0.4%. This was well below last month’s gain of 0.4%.

The aftershocks of the Brexit vote continue to reverberate in the Britain and Europe, but the dust has begun to settle, as markets have stabilized and the British pound has steadied. Political leaders on both sides of the Channel will have to pick up the pieces and deal with the radical new landscape, which was unthinkable just a few months ago – that of a European Union without Britain. The vote to leave the EU, which stunned the markets and the public, has caused deep instability in Europe and the UK and wiped out a staggering $3 trillion from global stock markets. The currency and commodity markets showed strong volatility after the vote, with the pound plunging while gold surged higher. Chancellor of the Exchequer George Osborne and Bank of England Governor Mark Charney have sought to reassure the markets and the public that the situation is under control, but is it? The political picture in Britain is fluid, as the Conservatives must choose a new leader, the Labor Party is in turmoil and general elections are likely later in the year. On the financial front, the pound and the markets have taken a beating and London’s position as a world financial center has been shaken. The uncertainty is not going to disappear anytime soon, so traders can expect further volatility in the currency and commodity markets.

British Prime Minister Cameron, a staunch supporter of the EU, finds himself in the unenviable position of explaining the Brexit decision to fuming Europeans. Cameron arrived in Brussels for an EU Summit on Tuesday and the meeting was fraught with tension, dismay and anger. Clearly, the “divorce of the “century” between Britain and the EU could be rancorous and messy. Cameron has asked for time to prepare Britain’s exit and wants to renew “productive” relations with Europe. However, the Europeans are in no mood for hugs and kisses on both cheeks. German Chancellor Merkel said that the UK could not “cherry pick” and that a relationship with Europe entailed obligations and not just rights – in other words, the Europeans are rejecting “half membership”. As well, Europe wants Britain to exit as soon as possible, in order to minimize the uncertainty and instability caused by the Brexit vote. French President Hollande wasted no time going on the attack, saying that London should no longer remain a center for clearing euro trades. This market is worth trillions of euros in currency and derivative deals and such a move would be a severe blow to London’s financial sector. Already, the European Banking Authority has announced it is leaving London and moving to Paris or Frankfurt.

WTI/USD Fundamentals

Wednesday (June 29)

  • 8:30 US Core PCE Price Index. Estimate 0.2%. Actual 0.2%
  • 8:30 US Personal Spending. Estimate 0.4%. Actual 0.4%
  • 8:30 US Personal Income. Estimate 0.3%. Actual 0.2%
  • 10:00 US Pending Home Sales. Estimate -0.9%. Actual -3.7%
  • 10:30 US Crude Oil Inventories. Estimate -2.3M. Actual -4.1M
  • 16:30 US Bank Stress Test Results

Upcoming Key Events

Thursday (June 30)

  • 12:30 US Unemployment Claims. Estimate 267K

*Key events are in bold

*All release times are EDT

WTI/USD for Wednesday, June 29, 2016

WTI/USD June 29 at 11:55 EDT

Open: 48.23 Low: 48.06 High: 49.16 Close: 49.16

WTI/USD Technical

S3 S2 S1 R1 R2 R3
39.32 43.45 46.49 50.13 53.50 56.79
  • WTI/USD was flat in the Asian and European sessions. The pair has posted gains in North American trade
  • 46.49 is providing support
  • There is weak resistance at 50.13

Further levels in both directions:

  • Below: 46.49, 43.45, 39.32 and 35.25
  • Above: 50.13, 53.50 and 56.79

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 and macroeconomic analysis, Kenny Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in major online financial publications including Investing.com, Seeking Alpha and FXStreet. Kenny has been a MarketPulse contributor since 2012.