US Crude Oil Gains Ground, Close to 5-Month Highs

US crude futures have posted gains on Wednesday, trading at $42.66 per barrel in the North American session. Brent crude futures are trading at $44.50, as the Brent premium has narrowed to $1.84. In economic news, US Existing Home Sales improved to 5.33 million, above the estimate of 5.29 million. Crude Oil Inventories dropped to 2.2 million, just above the forecast of 2.1 million. On Thursday, the US releases two key indicators – the Philly Fed Manufacturing Index and Unemployment Claims.

Crude prices have shown strong volatility this week, the result of an inconclusive meeting of oil producers in Qatar on Sunday. The gathering, which included OPEC and non-OPEC nations, ended in disarray, without any agreement being reached by the participants. There was optimism that the parties might agree not to exceed current production levels, but hopes for even this limited move were dashed when Saudi Arabia insisted that any agreement had to cover Iran. When this didn’t materialize, the participants closed up shop and returned home. The failure of the talks could severely undermine the credibility of oil producers, and the huge oversupply of crude could worsen if Saudi Arabia and other suppliers decide to increase output. US crude oil prices reacted sharply after the meeting, dropping 5 percent. However, US crude has since moved sharply upwards, surging over 10 percent and trading above the $42 level. Oil producers may have failed to reach an agreement, but they managed to cause plenty of volatility in the currency markets. Commodity currencies like the Canadian and Australian dollars followed the movement of oil, posting losses immediately after the inconclusive meeting, but have since posted sharp gains. A strike by Kuwaiti oil workers also contributed to volatility in the oil markets. The three-day strike, which ended on Tuesday, significantly disrupted oil production in Kuwait, a major oil producer.

This week’s US housing numbers have been a mix. Existing Home Sales climbed to 5.33 million in March, beating expectations. This was a welcome improvement from the weak February report of 5.08 million. However, housing data from earlier in the week were disappointing. Building Permits slipped to a 12-month low and Housing Starts also missed expectations. Housing numbers have not been able to keep pace with other key indicators, such as employment and consumer confidence numbers.

WTI/USD Fundamentals

Wednesday (April 20)

• 10:00 US Existing Home Sales. Estimate 5.29M. Actual 5.33M
• 10:30 US Crude Oil Inventories. Estimate 2.2M. Actual 2.1M

Upcoming Key Events

Thursday (April 21)

• 8:30 US Philly Fed Manufacturing Index. Estimate 8.1 points
• 8:30 US Unemployment Claims. Estimate 265K

*Key events are in bold

*All release times are EDT

WTI/USD for Wednesday, April 20, 2016

WTI/USD April 20 at 10:50 EDT

Open: 41.84 Low: 41.29 High: 42.67 Close: 42.66

WTI/USD Technical

• WTI/USD was flat in the Asian and European sessions. The pair has posted gains in North American trade.
• 40.00 is providing support
• There is resistance at 43.45

Further levels in both directions:

• Below: 40.00, 37.75, 35.09 and 32.22
• Above: 43.45, 46.69 and 50.13

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