WTI Crude Improves on Weak Crude Inventories Report

WTI Crude is showing limited movement on Wednesday, trading at $38.32 per barrel early in the North American session. Crude has dropped sharply since Friday, when the price stood at $42 per barrel. Taking a look at economic news, the EIA Crude Oil Inventories Report posted a sharp decline of 3.6 million. On Thursday, we’ll get a look at more US job numbers, with the release of Unemployment Claims.

Oil prices have risen on Wednesday, following a surprise decline in the EIA Weekly Crude Oil Inventories report. The reading of -3.6 million surprised the markets, which had expected a surplus of 0.7 million. It was the indicator’s first decline since late September. Still, the price of oil remains close to its lowest levels since February 2009. Meanwhile, there was disappointment, but not a great deal of surprise as OPEC members failed to reach an agreement on production cutbacks at a meeting in Vienna late last week. Oil producers have shown little inclination to reduce their market share and cut back production, resulting in a huge global glut of oil that has led to a serious shortage of land-storage facilities, and many tankers cannot unload their cargo. The statement issued after the meeting was noticeable in that it failed to mention a production target, as previous OPEC meetings have at least stated a production target, even if historically OPEC members have cheated and produced above their quota. The lack of a production target points to deep discord amongst the OPEC nations, which means that production levels will remain at higher levels, and oil prices could continue to head south.

The markets have become somewhat spoiled with strong job numbers out of the US, so a weak reading from JOLTS Jobs Openings on Tuesday came as a rude surprise. The important employment indicator slipped to 5.38 million, sharply lower than the previous month’s reading of 5.53 million. This soft figure was way off the estimate of 5.59 million. Still, one disappointing employment release is unlikely to deter the Federal Reserve from proceeding with an expected rate hike at the policy meeting on December 16. The US will release key data later in the week, including CPI and PPI. Persistently low inflation levels have weighed on the US economy and are well below the Fed target of 2 percent, and is a key reason why the Fed did not raise rates earlier this year. However, Yellen stated that she expects inflation numbers to improve, so weak inflation is unlikely to be an impediment to the FOMC approving a rate hike, which has not occurred in over nine years.

WTI/USD Fundamentals

Wednesday (Dec. 9)

• 15:00 US Wholesale Inventories. Estimate 0.2%. Actual -0.1%
• 15:30 US Crude Oil Inventories. Estimate +0.7M. Actual -3.6M
• 18:01 US 10-year Bond Auction

Thursday (Dec. 10)

• 13:30 US Unemployment Claims. Estimate 266K

*Key releases are highlighted in bold

*All release times are GMT

WTI/USD for Wednesday, December 9, 2015

WTI/USD December 9 at 15:40 GMT

WTI/USD  38.39 H: 38.43 L: 37.51

WTI/USD Technical

• Crude posted losses in the Asian session but recovered. The pair was steady in European trade and has posted gains in the North American session.
• 37.75 has switched to a support role as crude has posted gains.
• 39.87 is a resistance line.

Further levels in both directions:

• Below: 37.75, 35.09, 33.22 and 30.00
• Above: 39.87, 42.59, and 44.30

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