WTI/USD – Crude Up Slightly as US Inflation Rises

US crude prices have reversed directions on Thursday and posted slight gains. In the North American session, WTI/USD futures are trading at $45.70 per barrel. Brent crude is trading at $47.11, as the Brent premium stands at $1.41. On the release front, the Producer Price Index gained 0.5 percent, beating the estimate. Unemployment Claims remained at 254 thousand, beating expectations. Friday promises to be busy, as the US releases consumer inflation, retail sales and consumer confidence reports.

US numbers looked sharp on Thursday. Inflation showed some strength, as PPI climbed 0.5 percent, ahead of the estimate of 0.3 percent. This marked the highest monthly gain since May 2015. Core PPI followed suit with a gain of 0.4 percent, beating the forecast of 0.1 percent. On the employment front, Unemployment Claims remained at 254 thousand, below the estimate of 263 thousand. Is US inflation on the move? We’ll get a look at CPI numbers on Friday, and a solid release could boost the US dollar.

US crude prices have shown strong movement this week. The commodity dropped 2.8 percent on Wednesday, as crude stockpiles declined by 2.5 million, which was a larger decline than expected.  On Tuesday, the commodity sparkled, gaining 4.7 percent after an OPEC monthly report projected that demand for oil would increase as the oil glut is expected to fade. The report said that US production would continue to decline in 2017, while developing economies such as India and China would increase their demand for crude. At the same time, oil drilling in the US is on the increase, and this could send oil prices to lower levels.

When the Federal Reserve raised interest rates last December, it marked the first time it had done so in close to a decade. After the historic move,  there were high hopes that the Fed would continue with a series of hikes in 2016. Fast forward to July, and the Fed is yet to make a move this year, as the US economy has not matched its impressive growth rates in 2015. Last week’s Fed minutes reinforced the perception that the Fed is unlikely to tighten policy anytime soon, as the tentative Fed remains cautious about the strength of the US economy. Although some Fed members have said that rates could be raised up to two times in 2016, clearly the markets aren’t buying it. Given the current economic climate, the markets are pessimistic about any rates moves before 2017. Investors have priced in no chance of a rate increase at the next Fed meeting on July 26-27, and just an eight percent chance of a hike in 2016. Still, market sentiment can change very quickly, so if US employment and inflation numbers improve in the second half of the year, the likelihood of a rate hike this year will increase.

WTI/USD Fundamentals

Thursday (July 14)

• 8:30 US PPI. Estimate 0.3%. Actual 0.5%
• 8:30 US Unemployment Claims. Estimate 263K. Actual 254K
• 8:30 US Core PPI. Estimate 0.1%. Actual 0.4%
• 10:30 US Natural Gas Storage. Estimate 61B. Actual 64B

Upcoming Key Events

Friday (July 15)

• 8:30 US CPI. Estimate 0.2%
• 8:30 US Core CPI. Estimate 0.2%
• 8:30 US Retail Sales. Estimate 0.4%
• 8:30 US Core Retail Sales. Estimate 0.1%
• 10:00 US Preliminary UoM Consumer Sentiment. Estimate 93.7 

*Key events are in bold

*All release times are EDT

WTI/USD for Thursday, July 14, 2016

WTI/USD July 13 at 11:35 EDT

Open: 45.16 High: 45.79 Low: 44.98 Close: 45.70

WTI / USD Technical

• WTI/USD posted gains in the Asian session. The pair has been marked by choppy trading in the European North American sessions
• 46.69 is providing resistance
• 43.45 continues to provide support

Further levels in both directions:

• Below: 43.45, 39.32 and 35.25
• Above: 46.69, 50.13 and 53.50

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.