US Crude Dips on Pessimistic OPEC Report

US crude futures have started the week with losses, trading at $36.78 a barrel in the North American session. Brent crude futures are trading at $39.08, as Brent’s premium stands at $2.30. In economic news, it’s a quiet start to the week, with no US releases on the schedule. There is plenty of activity on Tuesday with the release of Retail Sales and PPI reports. The markets are bracing for small declines from these indicators.

OPEC released its monthly report on Monday, and the news was not good for oil producing nations. In the report, OPEC adjusted its forecast for 2016, saying that demand will not be as high as previously expected, leading to an even bigger surplus than previously forecast. This sent oil prices lower to start the week. Still, calm has been restored to the markets in the past few weeks, as oil prices have stabilized and investors have felt more prone to risk. US crude broke above the $39 on Friday, its highest level since early December. Oil prices are also being carefully monitored by the Federal Reserve and other central banks, which are grappling with ultra-low inflation levels, fueled by the collapse in oil prices.

Monday aside, it’s a busy schedule on release front this week, which could spell significant volatility in the currency markets. The US will release inflation and retail sales reports on Tuesday, followed by the FOMC policy statement on Wednesday. Will the Federal Reserve raise interest rates? Most experts say no, given current economic conditions. The economy continues to expand, although growth has been softer in 2016 compared to the red-hot pace which marked the economy in H2 of 2015. The primary trouble spot in the economy is the inflation picture, as inflation levels remains very low, a result of weak global demand and low oil prices. The cautious Fed will likely wait until mid-2016, and seriously consider a rate hike if the US economy shows that it is gaining steam.

WTI/USD Fundamentals

Monday (March 14)

• There are no US releases on Monday

Tuesday (March 15)

• 8:30 US Core Retail Sales. Estimate -0.2%
• 8:30 US PPI. Estimate -0.2%
• 8:30 US Retail Sales. Estimate -0.1%

*Key events are in bold

*All release times are EST

WTI/USD for Monday, March 14, 2016

WTI/USD March 14 at 13:05 EST

Open: 38.42 Low: 36.69 High: 38.44 Close: 36.78

WTI/USD Technical

• WTI/USD was flat in the Asian session. The pair has posted losses in the European session and has leveled off in North American trade.
• There is resistance at 37.75
• 35.09 is providing support

Further levels in both directions:

• Below: 35.09, 32.22 and 30.00
• Above: 37.75, 40.00, 43.45 and 46.69

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