W. Texas Crude Slides to $51 as US Crude Inventories Soar

West Texas crude has declined sharply in the Wednesday session. In North American trade, WTI crude futures are trading at $51.13, down 3.3% on the day. Earlier in the day, crude fell below the $51 level for the first time since January 18. Brent crude futures have slipped to $53.87, as the Brent premium is at $2.74. On the release front, ADP Nonfarm Employment Change soared to 298 thousand, well above the estimate of 184 thousand. Crude Oil Inventories jumped to 8.2 million barrels, crushing the estimate of 1.1 million. On Thursday, the US releases unemployment claims, with the indicator expected to rise to 239 thousand.

Another week, another surplus from Crude Inventories. The indicator has posted surpluses in 11 of the past 12 weeks, reflective of increasing US oil production. Most of the surpluses have been much higher than the forecasts, as the markets continue to underestimate the level of crude stockpiles. The ongoing surplus has put a damper on OPEC’s hopes to raise prices, as the cartel has cut production levels since January 1. Although compliance with the agreement stands at 94%, crude prices have failed to break out and push past the $55 level in 2017.

Will the Federal Reserve press the rate trigger at next week’s policy meeting? The US economy continues to perform well, inflation has moved higher and the employment market remains close to capacity. These ingredients appear to be the right mix for a rate move, and the markets have big expectations that the Fed will not disappoint. The likelihood of a March hike has jumped to 84%, according to the CME group, compared to 33% just a week ago. The markets will be listening closely to Fed policymakers ahead of next week’s meeting, and further hints of a March move would likely prop up the US dollar.

WTI/USD Fundamentals

Wednesday (March 8)

• 8:15 US ADP Nonfarm Employment Change. Estimate 184K. Actual 298K
• 8:30 US Revised Nonfarm Productivity. Estimate 1.5%. Actual 1.3%
• 8:30 US Revised Unit Labor Costs. Estimate 1.6%. Actual 1.7%
• 10:00 US Final Wholesale Inventories. Estimate -0.1%. Actual -0.2%
• 10:30 US Crude Oil Inventories. Estimate 1.1M. Actual 8.2 million
• 13:01 US 10-y Bond Auction. Actual 2.56%

Thursday (March 9)

• 8:30 US Unemployment Claims. Estimate 239K

*All release times are GMT

*Key events are in bold

WTI/USD for Wednesday, March 8, 2017

WTI/USD March 8 at 13:30 EST

Open: 52.82 High: 52.92 Low: 51.07 Close: 51.13

WTI USD Technical

WTI/USD was flat in the Asian and European sessions and has posted sharp losses in North American trade

• 46.54 is providing support
• 52.22 has switched to a resistance role
• Current range: 46.54 to 52.22

Further levels in both directions:

• Below: 46.54, 40.57 and 33.22
• Above: 52.22, 58.32, 65.05 and 72.99

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