US crude has posted considerable gains on Monday, following sharp losses in the Friday session. In North American trade, WTI/USD futures are trading at $45.98 per barrel. Brent futures have risen to $47.38, as the Brent premium stands at $1.40. In economic news, oil exporters are meeting in Algiers from September 26-28. In the US, New Home Sales dropped to 609 thousand, but this was enough to beat the forecast of 598 thousand. On Tuesday, the US releases CB Consumer Confidence, a key consumer indicator.
Oil prices were down sharply to end the week, and the volatility has continued in the Monday session, as US crude has gained 2.0 percent. Crude has risen as oil exporters have gathered in Algiers for the International Energy Forum (IEF). OPEC members are expected to meet on Wednesday, on the sidelines of the IEF meeting, to discuss limiting production levels in order to stabilize oil prices. However, analysts are skeptical that even an informal agreement will be reached, as previous attempts to limit output have failed. Still, the huge oversupply of oil has taken a large bite out of the oil revenues of OPEC countries and added a sense of urgency to reach an agreement. Traders can expect more volatility from crude prices ahead of the OPEC meeting.
The Federal Reserve released its highly-anticipated rate statement on Wednesday. As widely expected, the bank maintained the benchmark interest rate at 0.25%, where it has been pegged since last December. In a highly unusual step, however, three of the ten FOMC members dissented with the decision to hold rates, preferring to raise rates immediately by a quarter-percentage point. This was the first time since December 2014 that three FOMC voting members have dissented with the Fed rate decision. This significant dissent within the FOMC underscores continuing divisiveness within the Fed, with one economist calling the Fed decision “one of the most decisive FOMC meetings in recent memory”. Recent comments from FOMC members regarding a rate hike have conflicted with each other, and the mixed messages have left the markets confused. The surprising level of dissent in Wednesday’s Fed announcement will do little to restore market confidence in the Fed, which back in December 2016 promised up to four rate hikes in 2016, but has yet to raise rates this year.
The Fed sent a hawkish message to the markets in its policy statement, hinting broadly at a December rate hike. The Fed stated that “the case for an increase in the federal funds rate has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives.” Reading between the lines, the Fed is looking for stronger inflation numbers, and upcoming inflation indicators (as well as consumer spending and employment) will have a significant impact on the odds of a December rate hike. As far as future rate moves, the Fed was dovish, scaling back projections for 2017 from three to two hikes and lowering its longer-run interest rate forecast to 2.9 percent from 3.0 percent.
Monday (September 26)
- 10:00 US New Home Sales. Estimate 598K. Actual 609K
- 11:45 US FOMC Member Daniel Tarullo Speaks
Tuesday (September 27)
- 10:00 US CB Consumer Confidence. Estimate 98.6
*Key events are in bold
*All release times are EDT
WTI/USD for Monday, September 26, 2016
WTI/USD September 26 at 12:45 EDT
Open: 44.90 High: 46.20 Low: 44.44 Close: 45.98
WTI USD Technical
- WTI/USD was flat in the Asian session. The pair posted small gains in the European session and continues to gain ground in North American trade
- 43.45 is providing support
- There is resistance at 46.49
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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