Crude Showing Little Movement Ahead of Crucial Fed Meeting

WTI Crude is very quiet on Tuesday, trading at $36.68 per barrel in the European session. Today’s key event is CPI, which is expected to slip to a flat reading of 0.0%. All eyes are on the Federal Reserve policy meeting on Wednesday, with the Fed expected to raise interest rates for the first time in almost 10 years.

With the supply of oil far exceeding demand, oil prices have nosedived, with crude futures prices slipping some 32% since the start of the year. US crude inventories posted a surprise decline in the most recent reading, but this failed to put in a dent in the downward decline of crude. Oil storage facilities on land are so full that dozens of tankers remain at sea, laden with oil and unable to discharge their cargo. The recent OPEC meeting, in which members couldn’t agree on any cuts and failed to even issue a production target, has only made matters worse. With Russia continuing to produce at high levels and Iran waiting in the wings to export its oil, prices could continue to head south as we head into 2016, with some analysts predicting prices below $30 a barrel.

Crude oil investors remain on the sidelines, waiting for a crucial Fed meeting which could prove to be the economic release of the year. The Fed will conclude a two-day policy meeting on Wednesday and all indications are that the Fed will raise rates by 0.25%, to be followed by further rate hikes in 2016. The Fed last raised rates back in June 2006, and Fed chief Janet Yellen and other policymakers have sent broad signals to the markets that the US central bank if finally ready to press the rate trigger. The US economy is close to full employment, and Yellen recently stated that she was not concerned about persistently low inflation. How the commodity markets will react to a hike is of course, the million dollar question. Given that the markets have had ample time to price in this event, volatility from crude oil could be limited. At the same time, even a small rate increase represents a huge shift in the Fed’s monetary policy, which could help boost the US dollar.

WTI/USD Fundamentals

Tuesday (Dec. 15)

• 13:30 US CPI. Estimate 0.0%
• 13:30 US Core CPI. Estimate 0.2%
• 13:30 Empire State Manufacturing Index. Estimate -5.7 points
• 15:00 US NAHB Housing Market Index. Estimate 63 points
• 21:00 US TIC Long-Term Purchases. Estimate 32.4B

Upcoming Key Events

Wednesday (Dec. 16)

• 13:30 US Building Permits. Estimate 1.16M
• 19:00 US FOMC Economic Projections
• 19:00 US FOMC Statement
• 19:00 US Federal Funds Rate. Estimate <0.50%
• 19:30 US FOMC Press Conference

*Key releases are highlighted in bold

*All release times are GMT

WTI/USD for Tuesday, December 15, 2015

WTI/USD December 15 at 12:55 GMT

WTI/USD  36.45 H: 37.10 L: 36.04

WTI/USD Technical

• Crude was flat in the Asian session and has shown limited movement in European trade.
• 37.75 is an immediate resistance line
• 35.09 continues to provide support

Further levels in both directions:

• Below: 35.09, 33.22 and 30.00
• Above: 37.75, 39.87, 42.59, and 44.30

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