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Kenny Fisher
Crude Oil

After showing limited movement for most of the week, crude prices are slightly higher in Thursday trade. In the European session, WTI is trading at $53.25, up $0.53, or 1.04%. Brent crude is trading at $59.52, up $0.66, or 1.05%.

Fed Sounding Dovish

When the Federal Reserve speaks, the markets listen. On Wednesday, the Federal Reserve released the minutes of the September meeting, when policymakers trimmed rates by 25 basis points. The message from the minutes was on the dovish side, as FOMC members said that the risks to U.S. growth “were tilted to the downside.” The minutes flagged issues that are nagging the U.S. economy – weak global growth, the toll of the U.S-China trade war and low inflation. The markets are expecting another rate cut from the Fed at the October meeting, with the CME Group forecasting the likelihood of a 1/4 point rate cut at 85%. The U.S. economy has lost some steam, and the Federal Reserve appears poised to implement a third rate cut since July in order to stimulate the slowing economy.

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Crude Inventories Point to Another Surplus

Investors are becoming accustomed to crude inventory surpluses. The Energy Information Administration (EIA) posted a fourth successive surplus on Wednesday, with a strong gain of 2.9 million barrels. This was much higher than the estimate of 1.8 million. The string of surpluses points to an oversupply of crude, which has resulted in downward pressure on oil prices.

U.S. Inflation Dips

The markets had low expectations for September’s consumer inflation reports, but the readings were lower than predicted. The headline reading slowed to 0.0%, its lowest level since January. Core CPI fell to 0.1%, down from 0.3% in August. Soft U.S. inflation is another sign of weaker economic activity in the economy, which could mean weaker demand and lower prices for crude.

WTI/USD 4-hour Chart
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