US Crude is steady on Monday, as February futures are trading at $29 a barrel in the North American session. There are no scheduled releases, as the US markets are closed for the Martin Luther King holiday.
US releases wrapped up the week on a mixed note. Core Retail Sales and Retail Sales both posted declines of 0.1%, pointing to weakness in consumer spending, a key driver of economic growth. At the same time, consumer confidence remains at high levels, as the UoM Consumer Sentiment jumped to 93.3 points, beating the estimate and posting a six-month high as well. Inflation levels, one of the sore points in a generally bright economic picture, continue to struggle. PPI, which measures inflation in the manufacturing sector, came in at -0.2%, matching expectations. Still, this marked the third decline in four months, and persistently weak inflation could delay the next Fed rate hike. There was more bad news from the manufacturing front, another trouble spot in the economy. The Empire State Manufacturing Index plunged to -19.4 points, compared to an estimate of -4.1 points.
Oil prices continue to slip, as crude fell below the symbolic $30 level on Friday. Crude has fallen 8 dollars in the month of January, a whopping 22% decline, and are languishing at levels not seen since February 2004. Things could go from bad to worse, as Iran has been given the green light to export its oil. Western nations, led by the US, officially lifted all sanctions on Iran over the weekend, after the International Atomic Energy Agency announced that Iran had fully complied with its obligations under the nuclear agreement with the Western powers. Iran is expected to immediately begin exporting up to 600,000 barrels/day, adding to the huge glut of oil on global markets which led to oil prices tumbling. Meanwhile, OPEC said that it had pumped less oil in the month of December, but this is unlikely to lower oil prices, with Iran becoming the latest supplier in an overly crowded market.
Is the Federal Reserve planning another rate hike? The Fed raised interest rates in December for the first time in nine years, and hinted that this move was the first of a series in 2016. Not surprisingly, this has led to intense market speculation as to the timing of another rate hike. A rate hike in late January is not considered likely, coming so soon after the December move. A hike by the Fed in March is more probable, contingent on a strong US economy. Although the economy is in good shape, one major area of concern is the inflation picture. Inflation levels have not kept up with other economic indicators and remain at low levels. The minutes of the December meeting indicated that some Fed members strongly considered voting against the December rate hike due to weak inflation. Another concern is a lack of wage growth, despite a robust labor market. This was underscored by the last Average Hourly Earnings report, which came in at a flat 0.0% in December. The Fed will be keeping a close eye on inflation and wage growth data before reaching a decision to raise rates for a second time.
Monday (Jan. 18)
- There are no scheduled US releases
*Key releases are highlighted in bold
*All release times are EST
WTI/USD for Monday, January 18, 2016
WTI/USD January 18 at 10:50 GMT
Open: 28.80 Low: 28.63 High: 29.80 Close: 29.27
- WTI/USD has been choppy in thin holiday trade.
- The round number of 30.00 has switched to a resistance role
- 26.64 is providing support
Further levels in both directions:
- Below: 26.64, 22.88 and 20.00
- Above: 30.00, 32.22 and 35.09