WTI/USD – US Crude Shrugs Off Crude Inventories Surplus

US crude is unchanged in the Thursday session. In North American trade, US crude futures are trading at $51.37. Brent crude futures are trading at $54.19, as the Brent premium is steady at $2.82. In economic news, US numbers impressed, as manufacturing and employment reports easily beat expectations. Friday is Inauguration Day in the US, and the markets will be closely monitoring President-elect Trump’s inaugural address to the American nation.

US Crude Inventories continues to indicate a large surplus in stockpiles. The indicator recorded a gain of 2.3 million barrels, compared to the forecast of just 0.1 million. Last week, the indicator posted a large surplus of 4.1 million barrels, also much higher than expected. Will the upward trend continue? Higher oil prices have made the market more attractive for US shale producers and on Wednesday, the International Energy Agency predicted a “significant” boost to US output as a result of the OPEC agreement. Meanwhile, OPEC released its monthly production report on Wednesday, which showed that production was slightly lower in December than in November. Markets will be keenly interested in the January data, as the agreement to cut output between OPEC, Russia and other producers took effect on January 1. Saudi Arabia and other producers say they are strictly adhering to the agreement, but experts remain skeptical, as producers have failed to honor their quotas in previous agreements.

US numbers impressed on Thursday. The Fed Philly Manufacturing Index improved to 23.6, crushing the forecast of 16.3. This marked the highest reading since November 2014. On the job front, Unemployment Claims dropped to 234 thousand, well below the forecast of 252 thousand. This marked the fourth straight week that jobless claims have come in below the forecast. Unemployment Claims remain close to levels not seen since the 1970s, as the US labor market remains close to capacity.

As Donald Trump is about to be sworn in as president, there is a feeling of unease in the air, despite a robust US economy. Trump’s upset election victory in November was warmly received by the markets, as the US stock market and the US dollar have climbed higher. However, confidence and hope are starting to give way to confusion and uncertainty, as Trump has failed to outline any specifics on his economic policies, while continuing to tangle with the media and fire off controversial Twitter messages. Trump’s comments earlier this week about the US dollar helped send the currency lower. In an interview with the Wall Street Journal on Monday, Trump complained that the currency was “too strong”. These sentiments were echoed on Tuesday by Trump advisor Anthony Scaramucci. Speaking at the World Economic Forum in Davos, Scaramucci warned that “we must be careful of a rising dollar.” Trump broke with the unwritten rule that US presidents refraining from commenting on the US dollar, and his comments could be a taste of more to come, as Trump is unlikely to veer from his habit of making controversial comments that could affect market movement.

WTI/USD Fundamentals

Thursday (January 19)

• 8:30 US Building Permits. Estimate 1.22M. Actual 1.21M
• 8:30 US Philly Fed Manufacturing Index. Estimate 16.3. Actual 23.6
• 8:30 US Unemployment Claims. Estimate 252K. Actual 234K
• 8:30 US Housing Starts. Estimate 1.19M. Actual 1.23M
• 10:30 US Natural Gas Storage. Estimate -235B. Actual -243B
• 11:00 US Crude Oil Inventories. Estimate 0.1M. Actual 2.3M
• 20:00 US Fed Chair Yellen Speech

Upcoming Key Events

Friday (January 20)

• Tentative – President Trump Speech

*All release times are EST

* Key events are in bold

WTI/USD for Thursday, January 19, 2017

WTI/USD January 19 at 12:45 EST

Open: 51.49 High: 51.84 Low: 51.32 Close: 51.37

WTI USD Technical

• WTI/USD is showing limited movement in the Thursday session
• 46.54 is providing support
• 52.22 remains a weak resistance line

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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