West Texas crude has edged lower in the Thursday session, as WTI/USD stays close to the $49 level. In North American trade, WTI crude futures are trading at $48.69. Brent Crude is trading at $51.81, as the Brent premium stands at $3.11. On the release front, Building Permits fell to 1.21 million, missing the estimate of 1.26 million. The Philly Fed Manufacturing Index dropped sharply to 32.8, above the forecast of 30.2 points. On the labor front, unemployment claims ticked down to 241 thousand, beating the forecast of 245 thousand. On Friday, the US will publish the UoM Consumer Sentiment report.
WTI crude remains under pressure and continues to trade below the $50 level. WTI plunged 8.7 percent last week and dipped below the $47 level on Tuesday. This was in response to reports that Saudi Arabia has increased oil production above 10 million barrels a day, raising concerns about a global oil glut. Meanwhile, US Crude Oil Inventories finally reversed directions, posting a drawdown of 0.2 million barrels, compared to an estimate of 3.3 million. This decline comes after the indicator posted 11 surpluses in the past 12 weeks, reflective of increasing US shale production. The string of surpluses has dampened OPEC’s hopes of raising prices, as the cartel cut production levels at the beginning of January. OPEC’s cuts had raised expectations that crude would rise above $60 a barrel, but oil prices continue to lose ground in 2017.
There were no raised eyebrows when the Federal Reserve raised rates by a quarter-point on Wednesday, as the markets had priced a rate hike at over 90%. The rate hike, the second in just three months, raised the raised the benchmark lending rate to a 0.75%-1% range. What was not expected, however, was the sharp drop of the dollar against its major rivals. The markets were hoping that a red-hot US economy would propel the Fed to accelerate its pace of monetary tightening. There was disappointment as Fed Chair Janet Yellen reiterated that further rate hikes would be done gradually, pushing the dollar on Wednesday. As well, the US dollar may have lost ground due to traders and investors acting on "buy on rumor, sell on fact". This larges-scale selling of US dollars after the Fed hike has sent the US dollar broadly lower, with the pound gaining 1.7 percent since the Fed announcement.
