US crude futures posted gains on Wednesday, erasing the losses sustained in the Tuesday session. Crude is trading at $37.50 a barrel in the North American session. Brent crude futures are trading at $40.72, as Brent’s premium stands at $3.22. In economic news, US Wholesale Inventories posted a gain of 0.3%, beating expectations. US Crude Inventories rose by 3.9 million barrels, above the estimate of 3.0 million.
US crude prices are higher on Wednesday, despite an EIA report of a surplus of 3.9 million, well above expectations. Investors were more interested in the news that OPEC and other oil producers were planning to meet in Moscow on March 20 to discuss capping production. Oil prices have risen some 25% since mid-February, but with a huge oversupply of the commodity and no sign of demand increasing, prices could reverse and head toward the symbolic $30 level. The collapse in oil prices since mid-2015 may have put a smile on the face of the US consumer, but has also been a major contributor to weak inflation levels in the US and other developed economies.
A strong US Nonfarm Payrolls is often bullish for the US dollar, but an excellent January report failed to buoy the greenback against its major rivals late last week. The indicator impressed with a reading of 242 thousand, much higher than the estimate of 195 thousand. This was much stronger than the previous (revised) reading of 171 thousand. The US economy has added an average of 225,000 jobs per month since December, an impressive number considering that the economy has softened in the early part of 2016. Why then, did a stellar NFP release not impress the markets? The reason was that wage growth, which has consistently lagged behind other employment indicators, surprised the markets with a decline of 0.1% in January, the first drop in wages since December 2014. This indicator is closely linked to inflation, since an increase in wages means workers have more money to spend. The indicator’s decline means that that Federal Reserve’s inflation target of about 2.0% remains far off, so the Fed, which is keeping a close eye on the weak inflation picture, is unlikely to press the rate trigger at its policy meeting later this month.
WTI/USD Fundamentals
Wednesday (March 9)
- 10:00 US Wholesale Inventories. Estimate -0.2%. Actual 0.3%
- 10:30 US Crude Oil Inventories. Estimate 3.0M. Actual 3.9M
- 13:01 US 10-year Bond Auction
*Key events are in bold
*All release times are EST
WTI/USD for Wednesday, March 9, 2016
WTI/USD March 9 at 11:15 EST
Open: 36.50 Low: 36.38 High: 38.01 Close: 37.94
WTI/USD Technicals
| S3 | S2 | S1 | R1 | R2 | R3 |
| 32.22 | 35.09 | 37.75 | 40.00 | 43.45 | 46.69 |
- WTI/USD was flat in the Asian session. The pair has posted slight gains in the European session and stronger gains in North American trade.
- There is resistance at 37.75
- 35.09 is providing support
Further levels in both directions:
- Below: 37.75, 35.09, 32.22 and 30.00
- Above: 40.00, 43.45 and 46.69