WTI/USD – US Crude Sliding on Oversupply Concerns, $40 Next?

US crude prices haven’t skipped a beat on Monday, as the commodity continues to lose ground. In North American trade, WTI/USD futures are trading at $42.36. Brent crude futures are trading at $43.58, as the Brent premium stands at $1.22. On the release front, it’s a quiet start to the week, with no US events on the schedule. On Tuesday, the US will release key retail sales numbers.

Oil prices continue to slide, as US crude has fallen close to the $42 line, its lowest level since August. The commodity has plunged a whopping 9.1 percent so far in November. The Trump election win has caused turmoil in the markets and sent oil prices lower, and unexpectedly large surplus in US crude inventories have also weighed on crude prices. As well, there is increasing skepticism that OPEC members will revert to old habits and won’t be able to reach a production cap agreement when they meet in late November. On Friday, OPEC said its output hit a record 33.64 million barrels per day in October. Recently, OPEC said that it expects the crude oversupply to continue in 2017. If the cartel fails to reach an agreement, the slide could continue and oil prices could fall as low as $35 a barrel.

As the shock of a Trump presidency begins to wear off, investors and traders are asking what will a Trump election mean for the markets. Like much of his agenda, Trump’s economic platform is unclear. According to Bank of America Merrill Lynch, given that both houses of Congress are under Republican control, we could see Trump opt to loosen fiscal policy. This would lead to greater spending, causing more inflation. In turn, interest rates would move higher and bolster the US dollar. However, Trump remains an enigma, having never held public office. His ideology is unclear (if he has one), so the markets could be in for a period of uncertainty, at least in the early stages of the Trump administration. This could lead to prolonged volatility in the currency markets. As far as monetary policy is concerned, the odds of a rate hike in December also showed some volatility immediately after the election, but have jumped to a remarkable 85 percent, as all signs point to the first hike since last December.

WTI/USD Fundamentals

Monday (November 14)

• There are no British or US events on the schedule

Tuesday (November 15)

• 8:30 US Core Retail Sales. Estimate 0.5%
• 8:30 US Retail Sales. Estimate 0.6%

*All release times are EST

*Key events are in bold

WTI/USD for Monday, November 14, 2016

WTI/USD November 14 at 12:10 EST

Open: 43.45 High: 43.51 Low: 42.22 Close: 42.21

WTI USD Technical

• WTI/USD posted limited movement in the Asian and European sessions. The pair has posted losses in North American trade
• 40.57 is providing support
• There is resistance at 46.54

Further levels in both directions:

• Below: 40.57, 33.22 and 28.71
• Above: 46.54, 52.22 and 58.32

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