WTI/USD – Crude Drops Despite Crude Inventories Drawdown

US crude has posted small gains on Wednesday, following considerable losses in the Tuesday session. In North American trade, WTI/USD futures are trading at $45.24 per barrel. Brent futures are trading at $46.14, as the Brent premium continues to narrow. Currently, the premium stands at $0.90. In economic news, OPEC members are holding an informal meeting in Algiers. In the US, Crude Oil Inventories posted a drawdown of 1.9 million barrels, surprising the markets which had expected a surplus of 2.4 million. Durable Goods Orders came in at a flat 0.0%, above the forecast of -1.0%. Core Durable Goods Orders declined 0.4%, edging above the estimate of a 0.5% decline. As well, Federal Reserve chair Janet Yellen will testify before the House Committee on Financial Services. On Thursday, the US will release Final GDP and unemployment claims.

Oil prices dropped sharply on Tuesday, as key OPEC members have poured cold water on hopes of an agreement to cap production. OPEC members are holding an informal meeting on Wednesday, on the sidelines of the International Energy Forum. The oil cartel is meeting yet again to try and reach an agreement on limiting production levels in order to stabilize oil prices. However, Iranian Oil Minister Bijan Zanganeh has ruled out any agreement being reached in Algiers, but said that OPEC would continue to discuss a cap, with the aim of reaching an accord in November. The huge oversupply of oil have depressed prices which have taken a large bite out of the oil revenues of OPEC countries. This has added to the sense of urgency among OPEC members to try and reach some consensus on a production freeze. Meanwhile, US Crude Oil Inventories posted a fourth straight decline, continuing to confound the markets, which had predicted a surplus each time. Despite the surprise drawdown, US crude prices have edged lower on Wednesday.

Federal Reserve chair Janet Yellen will testify before a Congressional committee on Thursday, and her remarks could shed more light on the Fed’s plans regarding a rate hike. Last week, the Fed held interest rates at 0.25%. The Fed policy statement was generally upbeat and broadly hinted at a December rate hike. However, the markets can be forgiven for remaining somewhat skeptical, as the Fed has previously talked about a strong US economy and failed to follow up with a rate hike. Currently, a rate hike is priced in at 44 percent, but plenty can happen before the December policy meeting (the Fed is unlikely to make a move in November, just ahead of the US presidential election). The Fed has consistently stated that the next rate hike will be data-dependent, which means that stronger economic numbers, especially on the inflation front, will increase the likelihood of a December hike.

WTI/USD Fundamentals

Wednesday (September 28)

• 8:30 US Core Durable Goods Orders. Estimate -0.5%. Actual -0.4%
• 8:30 US Durable Goods Orders. Estimate -1.0%. Actual 0.0%
• 10:00 US Fed Chair Janet Yellen Testifies
• 10:10 US FOMC Member James Bullard Speaks
• 10:30 US Crude Oil Inventories. Estimate 2.4M. Actual -1.9M
• 19:15 US FOMC Member Esther George Speaks

Thursday (September 29)

• 8:30 US Final GDP. Estimate 1.3%
• 8:30 US Unemployment Claims. Estimate 260K
• 16:00 US Federal Reserve Chair Janet Yellen Speaks

*Key events are in bold

*All release times are EDT

WTI/USD for Wednesday, September 28, 2016

WTI/USD September 28 at 11:20 EDT

Open: 44.88 High: 45.80 Low: 44.56 Close: 44.64

WTI USD Technical

• WTI/USD posted small losses in the Asian session. The pair posted gains in the European session but has retracted in North American trade
• 43.45 is providing support
• 46.69 was tested earlier in resistance and is a weak line. It could see further action in the North American session

Further levels in both directions:

• Below: 43.45, 38.38 and 32.33
• 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.