WTI/USD – US Crude Under Pressure as Oversupply Concerns Continue

US crude has ticked higher on Thursday, following sharp losses in the Wednesday session. In the North American session, WTI/USD futures are trading at $44.02 per barrel. Brent futures are trading at $46.78, as the Brent premium has widened to $2.76. In economic news, it was a data-heavy session. In the US, retail sales came in at -0.3%, weaker than the estimate of -0.1%. Unemployment Claims were close to the forecast, and the Philly Fed Manufacturing Index easily beat expectations. On Friday, the US releases CPI and UoM Consumer Sentiment.

On Wednesday, Crude Oil Inventories posted a slight drawdown of 0.6 million, well short of the forecast of a surplus of 2.8 million. This figure follows the shock reading last week of -14.5 million, compared to the forecast of +0.6 million. Oil prices have fallen 4.1 percent since Tuesday, in response to an International Energy Agency (IEA) report that the oil oversupply could extend into the middle of 2017. This assessment surprised the markets, as the IEA veered sharply from its report a month ago, when it projected that the market would not show any surplus for the rest of the year. The revised IEA report comes on the heels of an OPEC report, which projected the oil glut to continue into 2017 due to an increase in production from non-OPEC members.

With a crucial Federal Reserve policy meeting on September 21, the Fed has imposed a blackout period on public comments from FOMC members. Recent comments from FOMC members have done little to clarify what are Fed’s monetary plans for the remainder of the year. As things currently stand, a September hike has been priced in at 15%, while the likelihood of a December move is 43%. These numbers could drop after unimpressive data from US retail sales reports on Thursday. Retail Sales declined 0.3% in August, marking its first decline in five months. There was no relief from Core Retail Sales, which fell 0.1% and missed expectations. The weak retail sales numbers point to softness in consumer spending, a key driver of economic growth. Next up are consumer inflation and confidence reports, which will be released on Friday. Inflation numbers have been very soft for months, and little change is expected in the August releases.

WTI/USD Fundamentals

Thursday (September 15)

• 8:30 US Unemployment Claims. Estimate 262K. Actual 260K
• 8:30 US Retail Sales. Estimate -0.1%. Actual -0.3%
• 8:30 US Philly Fed Manufacturing Index. Estimate 1.1. Actual 12.8
• 8:30 US PPI. Estimate 0.1%. Actual 0.0%
• 8:30 US Core Retail Sales. Estimate 0.3%. Actual -0.1%
• 8:30 US Core PPI. Estimate 0.1%. Actual 0.1%
• 8:30 US Current Account. Estimate -120B. Actual -120B
• 8:30 US Empire State Manufacturing Index. Estimate -0.9. Actual -2.0
• 9:15 US Capacity Utilization Rate. Estimate 75.8%. Actual 75.5%
• 9:15 US Industrial Production. Estimate -0.2%. Actual -0.4%
• 10:00 US Business Inventories. Estimate 0.1%. Actual 0.0%
• 10:30 US Natural Gas Storage. Estimate 57B. Actual 62B

Upcoming Key Events

Friday (September 16)

• 8:30 US CPI. Estimate 0.1%
• 8:30 US Core CPI. Estimate 0.2%
• 10:00 US Preliminary UoM Consumer Sentiment. Estimate 91.0

*Key events are in bold

*All release times are EDT

WTI/USD for Thursday, September 15, 2016

WTI/USD September 15 at 12:30 EDT

Open: 43.75 High: 44.20 Low: 43.26 Close: 44.02

WTI USD Technical

• WTI/USD was flat in the Asian session. The pair has posted small gains in the European and North American sessions
• 43.45 is a weak support line. It could break in the North American session
• There is resistance at 46.49

Further levels in both directions:

• Below: 43.45, 38.38 and 32.33
• Above: 46.69, 50.13, 53.50 and 59.69

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