WTI/USD – Crude Edges Lower Ahead of US Crude Inventories

US crude has recorded slight losses in the Tuesday session. In the North American session, US crude futures are trading at $52.39. Brent crude futures are trading at $55.67, as the Brent premium has widened to $3.28. On the release front, US Existing Home Sales fell to 5.49 million, short of the forecast of 5.55 million. On Wednesday, we’ll get a look at Crude Oil Inventories, a weekly report.

Donald Trump has barely warmed his new chair in the Oval Office, but dramatic change is already afoot. On Monday, Trump signed an executive order formally withdrawing the US from the Trans-Pacific Partnership, a broad trade agreement which the US had signed but not ratified. Trump had promised to leave the TPP during the election, arguing that the deal would hurt American workers. Next stop is NAFTA, which Trump has said he will renegotiate with Canada and Mexico. Trump has taken a tough line on US companies that have moved production outside of the US and has threatened to impose tariffs on companies that move production to Mexico. Predictably, these protectionist measures are raising concerns in the markets that the US economic growth could drop if the US takes an isolationist stance towards global trade, and such a stance would likely weigh on the US dollar. US trade partners could choose to retaliate against Trump’s moves, igniting a trade war in which there are no winners.

Will higher US output derail OPEC’s plan to raise oil prices? Last week, the International Energy Agency predicted a “significant” boost to US output as a result of the OPEC agreement. With some 35 US rigs commencing operations last week, according to Baker Hughes, US oil production continues to climb. This rise in US production is apparent from recent releases of US Crude Inventories, which point to a large surplus in stockpiles. Last week, the indicator recorded a gain of 2.3 million barrels, after a surplus of 4.1 million barrels a week earlier. Both readings were much higher than expected. On Sunday, OPEC announced that 1.5 million barrels had been taken out of the market, out of 1.8 million agreed to under the recent production agreement between OPEC and other oil exporters. Still, if US production continues to rise and offsets the cutbacks announced by OPEC, oil prices could head lower.

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WTI/USD Fundamentals

Tuesday (January 24)

• 9:45 US Flash Manufacturing PMI. Estimate 54.6. Actual 55.1
• 10:00 US Existing Home Sales. Estimate 5.54M. Actual 5.49M
• 10:00 US Richmond Manufacturing Index. Estimate 7. Actual 12

Wednesday (January 25)

10:30 US Crude Oil Inventories

*All release times are GMT

*Key events are in bold

WTI/USD for Tuesday, January 24, 2017

WTI/USD January 24 at 12:00 EST

Open: 52.93 High: 53.42 Low: 52.69 Close: 52.39

WTI USD Technical

WTI/USD was flat in the Asian session. The pair was choppy in European trade and has posted small losses in the North American session

• 52.22 is a weak support line
• 58.32 is the next resistance line
• Current range: 52.22 to 58.32

Further levels in both directions:

• Below: 52.22, 46.54, 40.57 and 33.22
• Above: 58.32, 65.05 and 72.99

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