US crude has moved higher on Wednesday, as WTI/USD futures are trading at $45.42 in the North American session. Brent futures are trading at $48.02, as the Brent premium stands at $2.60. On the release front, JOLTS Job Openings sparkled with a gain of 5.87 million, easily beating the forecast of 5.58 million. On Thursday, there are two key events – Crude Oil Inventories and Unemployment Claims.
The first key event of the week was dismal, as the ISM Non-Manufacturing PMI slid to 51.4 points in August, sharply lower than the 55.5 reading in July. This marked the weakest expansion pace in the services sector since 2008. This weak reading comes on the heels of the ISM Manufacturing PMI in August, which came in at 49.4 points, its first contraction in six months. Minor indicators released on Tuesday also disappointed. IBD/TIPP Economic Optimism slipped to 46.7 points, below expectations, while the Labor Market Conditions Index dropped 0.7 points.
US crude started the week with a bang, as the commodity gained as much as 5.3 percent in the Monday session. 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. However, oil prices have since retreated, as the cooperation agreement failed to provide any specifics over how to reduce the supply glut. Next up is 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. Oil producers met earlier in 2016 but failed to reach a production ceiling, as Iran refused to agree to any curbs in production. It’s doubtful that the Algiers meeting will be more successful, but oil prices tend to show strong movement around these meetings, and this will likely be the case once again.
After a spate of weak US numbers, there was positive news on Wednesday, as JOLT Job Openings climbed to 5.87 million, easily beating expectations. Last week, US employment numbers were dismal. Nonfarm Payrolls plunged to 151 thousand in August, down from 255 thousand a month earlier and well of the forecast of 180 thousand. Wage growth also disappointed, as Average Hourly Earnings edged lower to 0.1%, shy of the forecast of 0.2%. The CME FedWatch Tool is showing a substantial drop in the odds of a rate hike for both September and December – the likelihood of a September rise is at 19%, while the odds of a December hike are down to 39%. Even though the US labor market remains close to full capacity, many FOMC members remain uneasy about a rate hike, especially given the persistent lack of inflation in the economy. Key inflation indicators will be released in mid-September, just before the Fed policy meeting on September 21. These releases could play a critical role in determining if the Fed presses the rate trigger this month, or decides to revisit the rate question in December, exactly a year from the last rate hike.
Wednesday (September 7)
- 10:00 FOMC Member Esther George Speaks
- 10:00 JOLTS Jobs Openings. Estimate 5.58M. Actual 5.87M
- 10:00 Beige Book
Thursday (September 8)
- 8:30 Unemployment Claims. Estimate 264K
- 10:30 Crude Oil Inventories. Estimate 0.6M
*Key events are in bold
*All release times are EDT
WTI/USD for Wednesday, September 7, 2016
WTI/USD September 7 at 12:05 EDT
Open: 44.75 High: 45.53 Low: 44.55 Close: 45.42
WTI USD Technical
- WTI/USD posted slight gains in the Asian session. The pair was flat in European trade and is moving higher in the North American session.
- 43.45 is providing support
- 46.69 is a weak resistance line
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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