WTI/USD – US Crude Slide Continues on Crude Inventories Fallout

US crude continues to lose ground and has declined 1.4 percent in the Thursday session. In North American trade, WTI/USD is trading at $44.96 per barrel. Brent futures are trading at $46.69, as the Brent premium stands at $1.73. On the release front, unemployment claims rose to 265 thousand, close to 3-month high. ISM Nonfarm Manufacturing PMI also disappointed, dropping to 54.8 points. This was short of the estimate of 56.2 points. On Friday, the US will release additional employment numbers, led by Nonfarm Employment Change. The indicator is expected to climb to 174 thousand.

Oil prices continue to sag this week. US crude has declined 11.6 percent since October 20, when crude was trading close to $52. Oil prices have been falling as the OPEC agreement to cap production is in doubt, with Iran and other members voicing opposition to limits on their oil production. On Wednesday, Crude Inventories surprised the markets with a huge surplus of 14.4 million. The markets had predicted a gain of just 1.6 million. US crude is currently close to levels not seen since the end of September.

As expected, the Federal Reserve maintained the benchmark interest rate at 0.25% at Wednesday’s policy meeting. However, the tone of the policy statement was slightly hawkish message with regard to a December hike. The Fed said that the economy has improved and the employment market remains strong. The Fed also noted that inflation was moving towards its target of 2 percent. Weak inflation has long been the Achilles heel of the US economy, but this obstacle to a rate hike appears to have been removed. The policy statement hinted strongly at a December hike, noting that “the case for an increase in the federal funds rate has continued to strengthen but decided, for the time being, to wait for some further evidence of continued progress toward its objectives”.  Two FOMC members voted to raise rates immediately, Fed Presidents Esther George and Loretta Mester. With a December hike currently priced at over 70 percent, market sentiment towards the US dollar should remain positive and we could see gains against other major currencies.

WTI/USD Fundamentals

Thursday (November 3)

• 7:30 US Challenger Job Cuts. Actual -39.1%
• 8:30 US Unemployment Claims. Estimate 257K. Actual 265K
• 8:30 US Preliminary Nonfarm Productivity. Estimate 1.7%. Actual 3.1%
• 8:30 US Preliminary Unit Labor Costs. Estimate 1.6%. Actual 0.3%
• 9:45 US Final Services PMI. Estimate 54.8. Actual 54.8
• 10:00 US ISM Non-Manufacturing PMI. Estimate 56.2. Actual 54.8
• 10:00 US Factory Orders. Estimate 0.2%. Actual 0.3%
• 10:30 US Natural Gas Storage. Estimate 55B. Actual 54B

Upcoming Key Releases

Friday (November 4)

• 8:30 US Average Hourly Earnings. Estimate 0.3%
• 8:30 US Nonfarm Employment Change. Estimate 174K
• 8:30 US Unemployment Rate. Estimate 4.9%

*All release times are EDT

*Key events are in bold

WTI/USD for Thursday, November 3, 2016

WTI/USD November 3 at 12:00 EDT

Open: 45.75 High: 45.88 Low: 44.85 Close: 44.96

WTI USD Technical

WTI/USD showed limited movement in the Asian and European sessions. The pair has posted sharp losses in North American trade

• 43.45 is providing support
• 46.69 is a weak resistance line

Further levels in both directions:

• Below: 43.45, 38.38 and 33.22
• Above: 46.69, 50.13, 53.50 and 59.69

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.