WTI/USD – Crude Back Above $45 as Crude Inventories Declines Sharply

US crude is almost unchanged in Wednesday trading. In the North American session, WTI/USD futures are trading at $45.33 per barrel. Brent crude is trading at $47.02, as the Brent premium has narrowed to $1.69. On the release front, it’s a very light day, with just one event on the schedule – Crude Oil Inventories. The indicator posted a decline of 2.3 million, well off the estimate of 1.3 million. Thursday will be busy, with the US releasing unemployment claims as well as manufacturing and housing numbers.

Another week, another decline. The Energy Information Administration published its weekly crude inventory report, and the indicator showed a decline of 2.3 million, a much larger draw-down than the estimate of 1.3 million. Continuing large declines in US stockpiles should push crude prices higher due to stronger demand, but this isn’t occurring, as the markets remain worry about an oversupply. Drilling activity in the US is on the upswing, as the number of US drilling rigs continues to increase. This is raising concerns that higher production levels in the US will exacerbate supply levels and push down crude prices. In late June, US crude broke above the $50 level, but has since dropped about 10 percent and remains under pressure.

Central banks continue to hold the attention of the markets. Last week, the BoE surprised the markets and held off from lowering rates. Will the ECB make a move at its policy meeting on Thursday? The ECB is under pressure to adopt further monetary easing, but the markets are not expecting a rate cut from the current rate of 0.00%. Still, a dovish rate statement or any hints about further easing from Mario Draghi could push the euro downwards. The situation has become further complicated with the recent Brexit vote, as Britain, the second largest economy in Europe, will be soon be waving goodbye to the EU. This move (and the negotiations preceding it) are bound to have profound economic ramifications on both Britain and the EU and could result in significant volatility in the currency and commodity markets.

WTI/USD Fundamentals

Wednesday (July 20)

• 10:30 US Crude Oil Inventories. Estimate -1.3M. Actual -2.3M

Thursday (July 21)

• 8:30 US Philly Fed Manufacturing Index. Estimate 5.1
• 8:30 US Unemployment Claims. Estimate 271K
• 10:00 US Existing Home Sales. Estimate 5.48M

*Key events are in bold

*All release times are EDT

WTI/USD for Wednesday, July 20, 2016

WTI/USD July 20 at 12:20 EDT

Open: 45.57 High: 45.72 Low: 44.55 Close: 45.33

WTI USD Technical

• WTI/USD was flat in the Asian session. The pair posted losses in the European session but has reversed directions and gained ground in North American trade
• There is resistance at 46.69
• 43.45 is providing support

Further levels in both directions:

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

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