It’s been a busy day for US crude, which posted huge gains on Monday before retracting. In the North American session, WTI/USD futures are trading at $45.13 per barrel. Brent futures briefly pushed above the $49 level, but have dropped to $47.60, as the Brent premium stands at $2.47. The surge in oil prices occurred after Russia and Saudi Arabia announced that they would cooperate to stabilize oil markets. There are no US releases on Monday, as the markets are closed for Labor Day. On Tuesday, the US releases ISM Non-manufacturing PMI.
Oil prices soared on Monday, as US crude gained as much as 5.3% in the European session before giving up much of those gains. The impressive spike followed the surprise announcement that Russia and Saudi Arabia planned to cooperate to stabilize oil markets, as oil prices continue to show strong fluctuations. . The two countries signed a “cooperation accord” on Monday at the G-20 summit in China. The move comes prior to a meeting of OPEC and non-OPEC members in Algiers on September 26, and the Russian and Saudi Arabian oil ministers will meet in Algeria in October and discuss further steps. Ahead of the Algiers summit, there has been talk of a production freeze, but producers have been unable to reach any cap agreements at previous meetings. However, continuing talk of a possible cap in production could lead to oil prices climbing higher as we get closer to the Algiers meeting.
US employment numbers were dismal on Friday. Nonfarm Payrolls plunged to 151 thousand in August, down from 255 thousand a month earlier. Wage growth also disappointed, as Average Hourly Earnings edged lower to o.1%, shy of the forecast of 0.2%. Clearly this was not positive news, but August job data is often unreliable and tends to miss market forecasts. Will the Fed also give a “free pass” and ignore the weak job data? The markets apparently think so, as the odds of a rate hike this year are about the same after the payrolls report – the the likelihood of a September hike is 20 percent, while a December increase is pegged at 60 percent. Still, even if the August payrolls release is overlooked, the Fed will find it hard to justify a rate increase strictly based on a robust job market. Stronger inflation numbers for August, for example, would make a rate hike an easier sell to Fed members who remain uneasy about raising rates. Key inflation indicators will be released in mid-September, just before the Fed policy meeting on September 21. A lot can happen between now and the Federal Reserve’s policy meeting on September 21, so key US releases will be under the market microscope ahead of the Fed’s rate decision.
Monday (September 5)
- There are no US events on the schedule
Tuesday (September 6)
- 10:00 US ISM Non-Manufacturing PMI. Estimate 55.4
*Key events are in bold
*All release times are EDT
WTI/USD for Monday, September 5, 2016
WTI/USD September 5 at 12:30 EDT
Open: 44.14 High: 46.52 Low: 44.06 Close: 45.01
WTI USD Technical
- WTI/USD was flat in the Asian session. In European trade, the pair posted sharp gains but then retracted. WTI/USD is unchanged in the North American session.
- 43.45 is providing support
- There is resistance at 46.69
Further levels in both directions:
- Below: 43.45, 39.32, 37.75 and 34.81
- Above: 46.69, 50.13 and 53.50
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