West Texas Crude Higher as Crude Inventories Misses Expectations

West Texas crude has posted gains in the Thursday session, erasing the losses which marked the Wednesday session. In North American trade, WTI crude futures are trading at $54.49. Brent crude futures have dropped to $56.59, as the Brent premium stands at $2.10. On the release front, Cure Oil Inventories posted a surplus of 0.6 million barrels, well short of the estimate of 3.4 million. As well, unemployment claims rose to 244 thousand, slightly above the estimate of 242 thousand. On Friday, the US releases two key events – New Home Sales and UoM Consumer Sentiment.

Market response to the Federal Reserve’s minutes has been muted. There were no surprises in the minutes, which were slightly dovish in tone. The key statement in the minutes was that a rate hike “fairly soon” could be appropriate in order to head off an overheated economy. The minutes indicated that Fed policymakers remain confident that the central bank will raise rates gradually, given the strong performance of the US economy. At the same time, the minutes noted uncertainty about President Trump’s fiscal stimulus plan but little concern over the risk of inflation. So when can we expect a rate hike? Although pressure is slowly building towards a move by the Fed, there does not appear a sense of urgency to raise rates at the next meeting in March. According to the CME Group, the odds of a March hike are only at 17%, while the likelihood of a hike in either May or June stands above 40%.

West Texas crude has gained ground, following a bullish Crude Oil Inventories report. The weekly indicator posted a seventh consecutive surplus, but the reading of 0.6 million was much smaller than expected and marked the second weakest reading in 2017. This was in sharp contrast to the previous reading of 9.5 million. The string of surpluses underscore a sharp increase in US shale drilling, which threatens to offset the recent OPEC-Russia agreement to lower production and thus raise oil prices. The OPEC-Russia deal came into effect on January 1, and although compliance has been very high, oil prices have risen only marginally since the start of the year.

WTI/USD Fundamentals

Thursday (February 23)

• 7:00 US Treasury Secretary Steven Mnuchin Speaks
• 8:30 US Unemployment Claims. Estimate 242K. Actual 244K
• 9:00 US HPI. Estimate 0.4%. Actual 0.4%
• 10:30 US Natural Gas Storage. Estimate -86B. Actual -89B
• 11:00 US Crude Oil Inventories. Estimate 3.4M. Actual 0.6M 
• 13:00 US FOMC Member Robert Kaplan Speech

Upcoming Key Events

Friday (February 24)

• 10:00 US New Home Sales. Estimate 575K
• 10:00 US Revised UoM Consumer Sentiment. Estimate 96.1

*All release times are GMT

*Key events are in bold

WTI/USD for Thursday, February 23, 2017

WTI/USD February 23 at 11:35 EST

Open: 53.98 High: 54.92 Low: 53.93 Close: 54.49

WTI USD Technical

WTI/USD was flat in the Asian session. The pair posted considerable gains in the European session and is steady in North American trade

• 52.22 remains a weak support level
• 58.32 is the next resistance line
• Current range: 52.22 to 58.32

Further levels in both directions:

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

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