US Crude Oil Slide Continues on Oversupply Jitters

US crude futures continue to lose ground on Tuesday, trading at $36.40 a barrel in the North American session. Brent crude futures are trading at $38.65, as Brent’s premium stands at $2.25. In economic news, consumer spending and inflation reports posted soft numbers, as Retail Sales and PPI both showed declines of -0.2%.

US crude has dropped sharply this week, recording losses of close to $2.00, or 5.3%. On Monday, 0il prices reacted negatively to an OPEC report, which downgraded its forecast for 2016, saying that demand will not be as high as previously expected, meaning that surplus is projected to be higher than previously forecast. The markets had responded positively to recent price movement, as US crude has cobbled together four straight weekly gains. US crude broke above $39 on Friday, its highest level since early December. The markets had hoped that oil had bottomed up, and are nervous as oil has sharply reversed directions. Oil prices are also being carefully monitored by the Federal Reserve and other central banks, as developed economies continue to grapple with ultra-low inflation levels, fueled by the collapse in oil prices.

All eyes will be on the Federal Reserve on Wednesday, as the Fed concludes a two-day policy meeting. Most experts are expecting the Fed to remain on the sidelines and not raise rates, given current economic conditions. Although the US economy continues to expand, 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. Fed policymakers are divided on how to respond to persistently low inflation. Some FOMC members favor preempting inflation with a rate hike, while others feel that the economy is currently too fragile for such a move. The Fed will likely maintain its tightening bias and continue to monitor key economic indicators. If the US economy shows strength in H1 of 2016, the markets could be treated to a rate hike in the middle of the year.

WTI/USD Fundamentals

Tuesday (March 15)

• 8:30 US Core Retail Sales. Estimate -0.2%. Actual -0.1%
• 8:30 US PPI. Estimate -0.2%. Actual -0.2%
• 8:30 US Retail Sales. Estimate -0.1%. Actual -0.1%
• 8:30 US Core PPI. Estimate 0.1%. Actual 0.0%
• 8:30 US Empire State Manufacturing Index. Estimate -10.3 points. Actual 0.6 points
• 10:00 US Business Inventories. Estimate 0.0%. Actual 0.1%
• 10:00 US NAHB Housing Market Index. Estimate 59 points. Estimate 58 points

Wednesday (March 16)

• 8:30 US Building Permits. Estimate 1.20M
• 8:30 US Core CPI. Estimate 0.2%
• 14:00 FOMC Economic Projections
• 14:00 FOMC Statement
• 14:00 FOMC Federal Funds Rate
• 14:30 FOMC Press Conference

*Key events are in bold

*All release times are EST

WTI/USD for Tuesday, March 15, 2016

WTI/USD March 15 at 11:20 DST

Open: 37.30 Low: 36.05 High: 37.37 Close: 36.40

WTI/USD Technical

• WTI/USD posted losses in the Asian session. The pair has leveled off in the European and North American sessions.
• 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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