WTI/USD – US Crude Keeps Cruising as US Posts Strong Jobless, Manufacturing Reports

US crude has posted strong gains on Thursday, following five consecutive winning sessions. In the North American session, WTI/USD futures are trading at $48.21 per barrel. Brent crude has pushed above the key $50 level, trading at $50.70 per barrel. Currently, the Brent premium stands at $2.49. In economic news, Philly Fed Manufacturing Index improved to 2.0 points, while Unemployment Claims dipped to 262 thousand, as both indicators beat expectations.

Crude continues to point upwards, as US crude has reached the $48 level. The current rally, which started last Thursday, has seen crude prices soar by 15.6%, as there are signs that the oil market could tighten and result in higher oil prices. On Wednesday, Crude Oil Inventories posted a sharp decline of 2.5 million, compared to a forecast of a 0.3 million gain. It marked the sharpest decline in crude stockpiles in 5 weeks. Oil prices have also been boosted by reports that oil producers are discussing a curb on output in order to stabilize oil prices. OPEC members are planning to meet in Algiers in late September, and if an agreement to cap production is reached, supplies would be reduced and crude prices would move upwards. However, these oil summits have usually ended without an agreement, as was the case at an OPEC meeting earlier this year. Iran, which is back as a major producer after years of sanctions, scuttled the meeting and is unlikely to be agreeable to any cuts in production. Still, a number of major producers, such as Russia and Saudi Arabia have expressed a willingness to discuss a ceiling output, and we’re likely to see volatility from crude leading up to the September meeting.

Market confusion about Federal Reserve monetary policy appears to extend to Fed policymakers as well, according to the minutes of the July policy meeting. The minutes indicated that FOMC members are divided on the timing of a rate hike – some want to raise levels soon, as the US labor market approaches full employment, while others expressed concern about making a move with inflation levels well below the target of 2%. This debate needs to be resolved one way or another, as the Fed must make a rate decision next month. Clearly, policymakers will be swayed by economic data, particularly employment and inflation numbers. The news remains bleak on the latter front, as underscored by July’s consumer inflation reports. CPI posted a weak reading of 0.0%, its worst showing in five months. Core CPI dropped to 0.1%, shy of the estimate of 0.2%. Recent data is pointing in all directions, which explains why the Fed is divided over the timing of a rate hike. After a soft GDP report in late July, nonfarm payrolls was stellar. However, this was followed by weak retail sales and CPI numbers. As things stands now, a September hike is virtually off the table, while the odds of a December hike are pegged at 50/50.

WTI/USD Fundamentals

Thursday (August 18)

• 8:30 US Philly Fed Manufacturing Index. Estimate 1.4. Actual 2.0
• 8:30 US Unemployment Claims. Estimate 269K. Actual 262K
• 10:00 US CB Leading Index. Estimate 0.3%. Actual 0.4%
• 10:05 FOMC Member William Dudley Speaks
• 10:30 US Natural Gas Storage. Estimate 26B. Actual 22B

*Key events are in bold

*All release times are EDT

WTI/USD for Thursday, August 18, 2016

WTI/USD August 18 at 11:50 EDT

Open: 46.83 High: 48.24 Low: 46.64 Close: 48.21

WTI USD Technical

• WTI/USD was flat in the Asian and European sessions. The pair has posted sharp gains in North American trade
• 46.69 has some breathing room in support as WTI/USD has posted gains
• There is resistance at 50.13. This line has held firm since June 23

Further levels in both directions:

• Below: 46.69, 43.45 and 39.32
• Above: 50.13, 53.50 and 56.50

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.