WTI steady near 3-week low ahead of EIA report, FOMC meeting

West Texas Intermediate traded steady above a three-week low on Wednesday as market players remained cautious ahead of the outcome of FOMCs two-day meeting. The Fed will release its post-meeting statement at 18:00 GMT. Investors are also keeping a close eye on the Energy Information Administrations weekly crude oil inventories, which is poised to show a fifth consecutive drop according to analysts expectations.

On the New York Mercantile Exchange, WTI crude for September delivery traded at $103.38 a barrel at 7:19 GMT, up 0.29% on the day. Prices held in a tight range between days high at $103.46 and low of $103.06, the lowest since July 9. Light, sweet crude fell 0.99% on Tuesday, extending this weeks decline to 1.2% after closing 3.33% lower last week. However, the American benchmark is still headed to its best monthly advance since August 2012 after hitting a 16-month high earlier in July and having gained more than 7%.

Meanwhile on the ICE, Brent oil for September delivery traded at $106.90 a barrel at 7:20 GMT, down 0.01% on the day. Prices ranged between days high at $106.99 and low of $106.64 a barrel, the lowest since July 5. The contract slipped 0.56% on Tuesday, bringing current weeks decline to 0.2% after falling 1.8% during the previous two. The European benchmark however is also set to marking its best monthly performance since August 2012, supported by geo-political risks to supply.

Negative U.S. and China data

Oil remained pressured on Wednesday as negative sentiment over the U.S. economy’s recovery weighed on prices. The Conference Board reported on Tuesday consumer confidence in the world’s biggest oil consumer fell more than expected in July and stood at 80.3. The indicator was projected to plunge to 81.0 from June’s upwards revised reading of 82.1.

Meanwhile, a government report today will show Q2 GDP growth may have fallen to as much as 1.0% for the period April-June, down from 1.8% in the preceding quarter, according to analysts projections.

Michael McCarthy, a chief market strategist at CMC Markets in Sydney, said for Bloomberg: “There’s caution ahead of a number of key events for global demand. The China data that is due tomorrow is very important globally because it speaks to that demand side of the equation. Given the rise we’ve seen over the past couple of months, I suspect the bias is to cutting long positions, and that’s kept the market under pressure.”

China’s official manufacturing PMI will be released this week. Preliminary reading slipped to 49.8 from 50.1 in June, the first plunge below neutral level since 10 months. The country’s HSBC/Markit PMI fell to 47.7, compared to June’s final reading of 48.2, the lowest in 11 months. Final reading will be released on Thursday, August 1. Readings below 50 indicate contraction in the respective sector.

Crude reserves

Meanwhile, oil drew some support as the industry-funded American Petroleum Institute reported yesterday crude oil inventories fell for a fifth consecutive week, but the drop was smaller than expected. According to the report, U.S. crude stockpiles fell by 740 000 barrels last week. Gasoline inventories gained 1.8 million barrels, while distillate fuel reserves fell by 497 000 barrels. However, APIs report is considered as less reliable as it is based on voluntary information from operators of pipelines, refineries and bulk terminals.

Official government statistics will be published in EIAs report at 14:30 GMT. According to a weekly Bloomberg analysts survey, crude oil inventories will probably have fallen by 1.5 million barrels in the week ending July 26. Gasoline stockpiles should show a 1.5 million barrels decline, while distillate fuel inventories might have increased by 450 000 barrels.

Oil also continues to be supported amid output disruptions in the North Sea, political tension in Egypt, and outages in South Sudan, Iraq and Libya.

Investors remain cautious ahead of upcoming key U.S. data this week and the outcome of FOMC’s two-day meeting. On Wednesday, we’ll receive preliminary unemployment data prior to Friday’s Unemployment Rate and Non-Farm Payrolls. The ADP Employment Change is expected to remain flat at 188 000. Also on Wednesday, Personal Consumption Expenditures, Employment Cost Index and Chicago PMI will be released and the FOMC will announce its interest rate decision. On Thursday, Initial Jobless Claims are expected to have risen by 1 000 in the week ending July 27 and the ISM Manufacturing index should show improvement. On Friday, one of Fed’s main requirements to trim its monetary stimulus, the Unemployment Rate, is expected to have fallen to 7.5% in July, down from 7.6%, while Non-Farm Payrolls should have slipped by 10 000 to 185 000. Also on Friday are due Personal Income, Personal Spending, Average Hourly Earnings and Factory Orders.