Slumping Crude at 6-year Lows, Drops to $35

WTI Crude is uneventful on Thursday, after sliding about 4 percent a day earlier. In the European session, US crude is trading at $35.37 per barrel. In economic news, there are two key indicators on the schedule, the Philly Fed Manufacturing Index and Unemployment Claims.

In an historic move, albeit one that was widely expected, the US Federal Reserve raised interest rates by 0.25% at its policy meeting on Wednesday. The Fed had been sending a steady of stream of hints that it was intending to tighten monetary policy since the last policy meeting in late October. This gave the markets ample time to price in a rate hike, and the currency markets did not show much reaction to the Fed rate hike. The slight tightening move by the Federal Reserve is expected to have limited economic impact, but the psychological aspect cannot be overestimated, as the Fed has given the US economy a critical vote of confidence, and has signaled that additional rates are likely over the course of 2016. The carefully-crafted Fed strategy, which made sure that the markets were well-aware that a December hike was a likely scenario, contrasts sharply with the bungled approach of the ECB, which failed to communicate properly with the markets, which led to complete shock in the markets when the ECB failed to take any significant monetary steps at its December policy meeting, resulting in a sharp ascent by the euro.

Crude oil prices continue to lose ground, as January futures slipped 4 percent on Wednesday, falling below the $36 level. Crude is currently trading close to its lowest levels since February 2009. Global oil supplies far exceed demand, which is been hobbled by the weak global economy. Oil storage facilities on land are so full that dozens of tankers remain at sea, laden with oil and unable to discharge their cargo. The recent OPEC meeting, in which members couldn’t agree on any cuts and failed to even issue a production target, has only made matters worse. With Russia continuing to produce at high levels and Iran waiting in the wings to export its oil, prices could continue to head south as we head into 2016, with some analysts predicting prices below $30 a barrel. Meanwhile, the well-respected Moody’s rate agency sharply lowered its oil price assumptions on Tuesday, reflecting the huge disparity between supply of and demand for oil. The bottom line? There isn’t much of a case to make for buying oil at present, as oil prices could continue to soften.

WTI/USD Fundamentals

• 13:30 US Philly Fed Manufacturing Index. Estimate 2.1 points
• 13:30 US Unemployment Claims. Estimate 271K
• 13:30 US Current Account. Estimate -123B
• 15:00 US CB Leading Index. Estimate 0.2%
• 15:30 US Natural Gas Storage. Estimate -58B

*Key releases are highlighted in bold

*All release times are GMT

WTI/USD for Thursday, December 17, 2015

WTI/USD December 17 at 12:05 GMT

WTI/USD  35.20 H: 35.70 L: 34.99

WTI/USD Technical

• Crude has been uneventful in the Asian and European sessions.
• 37.75 has strengthened in resistance as crude oil continues to lose ground
• 35.09 is under strong pressure in support

Further levels in both directions:

• Below: 35.09, 32.22 and 30.00
• Above: 37.75, 39.87, 42.59, and 44.30

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