WTI/USD – Crude Quiet at $53, US Employment, Mfg. Data Improves

US crude continues to have an uneventful week. In Thursday’s North American session, WTI crude futures are trading at the $53 line. Brent crude futures are trading at $55.29, as the Brent premium of $2.29 has narrowed since Wednesday. On the release front, key indicators pointed higher. Unemployment claims rose to 239 thousand, beating the forecast of 245 thousand. The Philly Fed Manufacturing Index soared to 43.3 points, crushing the estimate of 18.5 points. Finally, Building Permits improved to 1.29 million, above the forecast of 1.23 million.

All eyes were on Federal Reserve Chair Janet Yellen earlier this week, as she made her semi-annual appearance before Congress. In her testimony, Yellen was upbeat about the US economy. She noted that inflation is moving towards the Fed’s 2 percent target, the labor market remains red-hot and consumer spending is strong. Yellen’s next challenge can be considered an enviable task – when is the appropriate time to raise rates in order to cool down the economy – in June or as early as March? A rate hike appears to be just a question of time, as Yellen warned that “waiting too long to remove accommodation would be unwise”. If the US economy stays on track in 2017, analysts expect two or three small rate hikes. At the same time, the Fed needs to take into account the economic stance of the new administration, which remains unclear. President Trump has promised to outline a tax reform plan in a few weeks, but has left the Fed and the markets in the dark regarding economic policy. Unless the economy takes an unexpected turn downwards, it’s very likely that the Fed will press the rate trigger by June.

As more US oil rigs continue to jump into the market, US crude stockpiles continue to record sharp surpluses. On Wednesday, Crude Oil Inventories jumped 9.5 million barrels, crushing the estimate of 3.7 million. This marked a sixth straight surplus, all of which beat their estimates.  The Energy Information Administration has projected that US production in 2017 will be the highest since 1970. This surge in US drilling could spell trouble for OPEC and Russia, which recently signed an agreement to lower production, in the hope of raising prices. The OPEC agreement came into effect on January 1, and analysts have noted that compliance with production cuts is at a record 90 percent. Despite these impressive numbers, US crude is slightly lower since the agreement took effect.

WTI/USD Fundamentals

Thursday (February 16)

• 00:15 US FOMC William Dudley Speech
• 8:30 US Building Permits. Estimate 1.23M. Actual 1.29M
• 8:30 US Philly Fed Manufacturing Index. Estimate 18.5 points. Actual 43.3 points
• 8:30 US Unemployment Claims. Estimate 243K. Actual 239K
• 8:30 US Housing Starts. Estimate 1.23M. Actual 1.25M
• 10:30 US Natural Gas Storage. Estimate -130B. Actual -114B

*All release times are GMT

*Key events are in bold

WTI/USD for Thursday, February 16, 2017

WTI/USD February 16 at 12:10 EST

Open: 53.03 High: 53.59 Low: 52.70 Close: 52.94

WTI USD Technical

WTI/USD showed limited movement in the Asian session. The pair posted small gains in the European session but gave up these gains in North American trade

• 52.22 remains a weak support level
• 58.32 is the next resistance line
• Current range: 52.22 to 58.32

Further levels in both directions:

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

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