US Crude Dips Below $28, Markets Eye Yellen Testimony, US Crude Inventories

US crude is steady on Wednesday, as March futures trade at the $28 level in the North American session. Brent crude futures are struggling just above the symbolic $30 level, trading at $30.59. In the US, today’s key event is on Capitol Hill, as Federal Reserve Chair Janet Yellen will testify before the House Financial Services Committee. With the markets looking for clues regarding the timing of another rate hike, this event could be a market-mover, so traders should be prepared for possible volatility. We’ll also get a look at US crude oil inventories.

The huge oil glut is unlikely to improve anytime soon, as underscored by the most recent inventories report, which showed a surplus of 7.8 million, much higher than the estimate of 3.7 million. This marked a second straight week that oil supplies were much higher than expected, and these readings have increased worries that demand for oil has weakened. The Chinese slowdown has pushed oil prices sharply lower, as the Asian giant is the world’s second largest consumer of oil. Low oil prices continue to contribute to financial turmoil around the globe, and the dismal outlook for oil will likely continue. A report by the International Energy Agency downgraded its forecast for oil demand and noted that the global oversupply will continue for most of 2016.

Fed chair Janet Yellen is under the spotlight, as she testifies before Congress on Wednesday and Thursday. Yellen is sure to face some pointed questions from lawmakers about the health of the US economy. After a historic rate hike in December, the Fed remained on the sidelines in January, and its dovish policy statement reflected a softening in US economic growth. Does this mean a March hike is off the table? Of course, Yellen will not play her rate cards, but the markets will be looking for some clarity from Janet Yellen about the Fed’s monetary plans. Just a couple of months ago, the Fed was hinting that we could see a series of rate hikes in 2016, but the recent turmoil in global markets has drastically changed these plans, with some experts openly questioning if the Fed will make any more moves before next year.

WTI/USD Fundamentals

Wednesday (Feb. 10)

• 10:00 Fed Chair Janet Yellen Testifies
• 10:30 US Crude Oil Inventories. Estimate 3.1M
• 13:01 US 10-year Bond Auction
• 14:00 US Federal Budget Balance. Estimate 10.3B

Upcoming Key Events

Thursday (Feb. 11)

• 8:30 US Unemployment Claims. Estimate 287K
• 10:00 Fed Chair Janet Yellen Testifies

*All release times are EST

WTI/USD for Wednesday, February 10, 2016

WTI/USD February 10 at 9:25 EST

Open: 28.41 Low: 27.77 High: 28.73 Close: 28.03

WTI/USD Technical

• US Crude was flat in the Asian session, and has posted losses in the European and North American sessions.
• 30.00 has switched to a resistance role as WTI/USD continues to lose ground.
• 26.64 is providing support.

Further levels in both directions:

• Below: 26.64, 22.88 and 17.05
• Above: 30.00, 32.22, 35.09 and 37.75

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.