US Crude Close to $48 as Gains Continue

US crude has posted small gains to start off the week. In the North American session, crude is trading at $47.79 per barrel. Brent crude is trading at $49.05, as the Brent premium stands at $1.26. On the release front, the US Empire State Manufacturing Index declined 9.0 points, much weaker than expected. On Tuesday, the US releases CPI and Building Permits.

US crude prices remain steady, as crude trades at its highest level since early November 2015. Crude received a boost as Canadian oil production has been disrupted as a massive wildfire in northern Alberta forced the evacuation of 90,000 people and disrupted shut down some oil facilities. Oil firms have restarted production in the region of the wildfire, albeit on a limited basis. Oil prices have taken a beating since last summer due to oversupply, but prices have stabilized in recent weeks. On Monday, the well-respected investment firm of Goldman Sachs said that oil could continue to climb, as a two-year state of oversupply was at an end due to global oil disruptions.

The US manufacturing industry continues to struggle, as underscored by an important manufacturing indicator on Monday. The Empire State Manufacturing Index posted a sharp decline of 9.0 points, well off the estimate of a gain of 7.2 points. The indicator had surprised with  a gain of 9.6 points in April, and the markets were counting on another strong gain. Manufacturing continues to be a soft spot in a generally solid economy, as a weak global economy and the slowdown in China have reduced demand for US-made goods.

US releases ended last week on a strong note, highlighted by solid retail sales and consumer confidence reports. Core Retail Sales posted a strong gain of 0.8%, above the estimate of 0.6%. Retail Sales surged 1.3%, its strongest gain in over six years. The gain was all the more impressive as the markets had anticipated a decline of 0.3%. Consumer confidence also looked sharp, as UoM Consumer Sentiment jumped to 95.8 points, compared to the estimate of 89.9 points. This was the indicator’s best showing since April 2015. On the inflation front, PPI posted a small gain of 0.2%, shy of the forecast of 0.3%. We’ll get a look at CPI reports on Tuesday. A rate hike remains on the table for June, but the Fed is unlikely to make a move if inflation numbers fail to improve. On Wednesday, the Fed will release the minutes of its April policy meeting. The markets will be combing through the report, looking for hints about what the Fed has planned for this summer.

WTI/USD Fundamentals

Monday (May 16)

• 8:30 US Empire State Manufacturing Index. Estimate 7.2. Actual -9.0
• 10:00 US NAHB Housing Market Index. Estimate 59. Actual 58
• 16:00 US TIC Long-Term Purchases. Estimate 36.5B

Upcoming Key Events

Tuesday (May 17)

• 8:30 US Building Permits. Estimate 1.13M
• 8:30 US CPI. Estimate 0.4%
• 8:30 US Core CPI. Estimate 0.2%

*Key events are in bold

*All release times are EDT

WTI/USD for Monday, May 16, 2016

WTI/USD May 16 at 11:00 EDT

Open: 45.97 Low: 45.80 High: 47.03 Close: 46.30

WTI/USD Technical

• WTI/USD posted gains in the Asian session. The pair was steady in the European session and has showed some choppiness in North American trade
• 43.45 is providing support
• 46.69 is a weak resistance line. It was tested earlier on Monday and could break in the North American session

Further levels in both directions:

• Below: 43.45, 40.00, 37.75 and 35.09
• Above: 46.69, 50.13 and 51.59

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