WTI/USD – US Crude Starts Week With Gains, Pushes Above $46

After a slow start to the week, US crude have posted strong gains in Monday’s North American session. Currently, WTI/USD futures are trading at $46.22 per barrel. Brent futures are trading at $48.10, as the Brent premium has narrowed to $1.88. In economic news, the only economic release is the 10-year bond auction. As well, FOMC member Lael Brainard will speak about monetary policy at an event in Chicago.

Crude Oil Inventories shocked the markets on Thursday, posting a staggering decline of 14.5 million which sent crude prices sharply higher. The markets had predicted a small gain of 0.6 million. Many analysts have been projecting that the huge oil glut will disappear by the end of 2016, and if this decline is not a one-time blip and inventories continue to drop, we could see oil prices head upwards. Major oil producers will meet in Algiers on September 26 to discuss a production freeze which could stabilize oil prices. At previous meetings, producers have been unable to reach any cap agreements, resulting in record production levels as each country has tried to grab as much market share as possible. Analysts are not expecting any breakthroughs at the Algiers summit, but we’re likely to see some volatility in oil prices in the days leading up to the meeting.

After Janet Yellen provided an upbeat assessment of the US economy at the Jackson Hole summit last month, speculation rose that the Fed might raise rates before the end of 2016. With the Federal Reserve policy meeting just over a week away, US key numbers will be under the market microscope. We’ll have to wait until Thursday and Friday for major releases, highlighted by retail sales, CPI and consumer confidence numbers. If these numbers are stronger than expected, the odds of a rate hike next week will move higher, and the dollar could make headway against its rivals. Although the US labor market remains close to capacity, many FOMC members will be reluctant to approve a rate hike based solely on strong employment numbers and will want to see stronger numbers throughout the economy. Consumer spending remains a concern, but the main sticking point is weak inflation levels, which will likely weaken even further if the Fed raises rates. The likelihood of a rate hike in 2016 has risen since last week, with the CME FedWatch Tool indicating a 24% chance for a September move and a 44% likelihood of a December hike.

WTI/USD Fundamentals

Monday (September 12)

• 13:00 US FOMC Member Lael Brainard Speaks
• 13:01 US 10-year Bond Auction

*Key events are in bold

*All release times are EDT

WTI/USD for Monday, September 12, 2016

WTI/USD September 12 at 12:10 EDT

Open: 45.39 High: 46.51 Low: 44.72 Close: 46.22

WTI USD Technical

• WTI/USD was flat in the Asian and European sessions. The pair has posted strong gains in North American trade
• 46.49 has weakened in resistance following strong gains by WTI/USD in the North American session
• 43.45 is providing support

Further levels in both directions:

• Below: 43.45, 38.38 and 32.33
• Above: 46.69, 50.13, 53.50 and 59.69

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