WTI/USD – Crude Slide Continues as Unemployment Claims Jumps

US crude has posted further gains on Thursday. In the North American session, WTI/USD futures are trading at $41.28. Brent crude is trading at $42.81, as the Brent premium stands at $1.53. On the release front, unemployment claims jumped to 266 thousand, higher than the estimate of 261 thousand. On Friday, the US will publish Advance GDP, with the markets expecting a strong expansion of 2.6%. We’ll also get a look at UoM Consumer Sentiment, which is expected to drop to 90.3 points.

Crude prices have slipped again on Thursday, following five straight losing sessions. The commodity has dropped close to the $41 level, following the Federal Reserve policy statement. As expected, the bank continued to hold the course on interest rates, maintaining levels at 0.25% in a 9-1 vote. The Fed statement was cautiously upbeat, saying that risks to the economy have receded and the employment market is getting tighter. However, there was some disappointment as the Fed failed to provide any clues about the timing of another rate hike. Will the Fed make a move and raise rates in September? It appears that the Fed could go either way, and policymakers will make a decision at the September meeting based on the strength of US data. This means that key US numbers, such as Friday’s Advance GDP report, will be under the market microscope, and unexpected readings could lead to strong volatility in the currency markets.

On Wednesday, US crude reacted negatively as Crude Oil Inventories surprised the markets with a rare surplus. The indicator pointed to a gain of 1.7 million barrels, compared to a forecast of -2.1 million. This reading underscores the continuing oversupply of crude on world markets. Drilling activity in the US is on the upswing, as the number of US drilling rigs continues to increase. This is raising concerns that higher production levels in the US will exacerbate supply levels and push down crude prices below the symbolic $40, which has held firm since mid-April. Other US indicators also missed expectations. Core Durable Goods Orders came in at -0.5%, well short of the forecast of 0.3%. There was no relief from Durable Goods Orders, which posted a sharp gain of 4.0%, compared to a forecast of -1.1%. This marked the weakest reading of 2016. There was more disappointing news on the housing front, as Pending Home Sales gained 0.2%, well short of the estimate of 1.9%.

WTI/USD Fundamentals

Thursday (July 28)

• 8:30 US Unemployment Claims. Estimate 261K. Actual 266K
• 10:30 US Natural Gas Storage. Estimate 29B. Actual 17B

Upcoming Key Events

Friday (July 29)

• 8:30 US Advance GDP. Estimate 2.6%
• 10:00 US Revised UoM Consumer Sentiment. Estimate 90.2

*Key events are in bold

*All release times are EDT

WTI/USD for Thursday, July 28, 2016

WTI/USD July 28 at 12:00 EDT

Open: 42.08 High: 42.25 Low: 41.29 Close: 41.44

WTI USD Technical

• WTI/USD was flat in the Asian and European sessions. The pair has posted sharp losses in North American trade
• 39.32 is providing support
• There is resistance at 43.45

Further levels in both directions:

• Below: 39.32, 35.25 and 30.55
• Above: 43.45, 46.69, 50.13 and 53.50

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