US Crude Steady at $30 in Light Holiday Trade

US crude is steady on Monday, as March futures trade just under the $30 level in the North American session. Brent crude futures are trading at $33.67. It’s likely to remain an uneventful day for crude, as the US markets are closed for a holiday and there are no US events on the calendar.

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 have also led to considerable volatility in the currency markets. This situation is unlikely to improve anytime soon – a recent report by the International Energy Agency downgraded its forecast for oil demand and noted that the global oversupply will continue for most of 2016.

Federal Reserve Chair Janet Yellen testified before Congress last week, and her cautious remarks were quite a contrast with the upbeat statement that the Fed released in December. At that time, the Fed raised rates by 0.25%, the first upward move in almost a decade, and hinted that the hot US economy would likely require a series of rate hikes in 2016. Fast forward to February, and Yellen was much more circumspect than just a few months ago. In last week’s testimony, Yellen entertained the possibility (albeit a remote one) of negative interest rates. The Fed has ruled out making such a move in the past, and this is unlikely to change. Still, it remains a relevant scenario, with the Bank of Japan recently joining the ECB in implementing negative rates. Yellen also noted that inflation rates have remained very low due to the strong US dollar and weak oil prices. Given the current economic situation, many experts expect no more than two rate hikes this year, perhaps in June and December. At the same time, any improvement in key US numbers will heat up speculation about a possible March hike, and the markets and the Federal Reserve will be closely monitoring upcoming employment and inflation numbers.

WTI/USD Fundamentals

Monday (Feb. 15)

• There are no US events on the calendar

*All release times are EST

WTI/USD for Monday, February 15, 2016

WTI/USD February 15 at 11:30 EST

Open: 29.08 Low: 28.97 High: 30.15 Close: 29.75

WTI/USD Technical

• WTI/USD was flat in the Asian session. The pair posted slight gains in European trade and has leveled off in North American trade.
• 30.00 is a weak resistance line. This is followed by 32.22
• 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

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