US Crude Subdued, Crude Inventories Jumps

US crude futures are almost unchanged on Wednesday, following losses on Monday and Tuesday. US Crude is trading at $44.12 in the North American session. Brent crude is trading at $45.22, as the Brent premium stands at $1.10. On the release front, Crude Oil Inventories increased to 2.8 million barrels, much higher than the estimate of 0.6 million. ADP Nonfarm Payrolls dropped sharply to 156 thousand, well short of the estimate of 205 thousand. ISM Non-Manufacturing PMI improved to 55.7 points, beating the estimate of 54.9 points.

After posting gains last week, US crude has reversed directions and is trading close to $44. The worldwide glut of oil continues to weigh on oil prices, although prices have moved higher in recent weeks. An oil summit in Qatar ended without an agreement on capping production, leaving room for prices to drop. OPEC members will meet on June 2, and will likely revisit the issue of freezing production in order to raise prices. US crude remains under pressure, as Crude Oil Inventories posted a sharp gain of 2.8 million, its highest surplus in three weeks. US crude had shown gains earlier on Wednesday, as a large forest fire in the Alberta oil sand region has disrupted production in the region.

ADP Nonfarm Payrolls was very low in April, dropping to just 156 thousand. This was the weakest reading in over two years, and surprised the markets, which have grown accustomed to releases above the 200-thousand level. We’ll get a look at Unemployment Claims on Thursday and the all-important Nonfarm Payrolls on Friday. The employment picture has been a bright spot in the US economy, as unemployment remains at very low levels and Nonfarm Payrolls have been above the 200-thousand threshold. Despite the robust labor market, however, consumer confidence and spending has not kept pace. Last week, UoM Consumer Sentiment dipped to 89.0 points short of the estimate of 90.3 points. This also marked the fourth straight drop for the key indicator. Consumer spending is a key engine of economic activity, and softer numbers in the first quarter were an important reason that US GDP weakened in the first quarter, with a lukewarm reading of 0.5%.

WTI/USD Fundamentals

Wednesday (May 4)

• 8:15 US ADP Nonfarm Employment Change. Estimate 205K. Actual 156K
• 8:30 US Preliminary Nonfarm Productivity. Estimate -1.3%. Actual -1.0%
• 8:30 US Preliminary Unit Labor Costs. Estimate 2.9%. Actual 4.1%
• 8:30 US Trade Balance. Estimate -45.6B. Actual -40.4B
• 9:45 US Final Services. Estimate 52.1. Actual 52.8
• 10:00 US ISM Non-Manufacturing PMI. Estimate 54.9. Actual 55.7
• 10:00 US Factory Orders. Estimate 0.7%. Actual 1.1%
• 10:30 US Crude Oil Inventories. Estimate 0.6M. Actual 2.8M

Upcoming Key Events

Thursday (May 5)

• 8:30 US Unemployment Claims. Estimate 261K

*Key events are in bold

*All release times are EDT

WTI/USD for Wednesday, May 4, 2016

WTI/USD May 4 at 11:25 EDT

Open: 43.86 Low: 43.41 High: 44.86 Close: 44.12

WTI/USD Technical

• WTI/USD was flat in the Asian session. The pair posted gains in the European session. In North American trade, the pair posted gains but has since retracted.
• 43.45 was tested earlier in support and could break in the North American session.
• There is resistance at 46.69

Further levels in both directions:

• Below: 43.45, 40.00, 37.75 and 35.09
• Above: 46.69, 50.13 and 51.59

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