US Crude Showing Limited Movement, Markets Eye Fed Announcement

US crude futures are unchanged on Monday, following strong gains on Friday. US crude is trading at $40.25 per barrel in the North American session. Brent crude futures are trading at $42.77, as the Brent premium stands at $2.52. There are no US economic indicators on Monday, but the markets will have a few cues during the day. US Treasury Secretary Jack Lew will speak at an event in Washington. FOMC member William Dudley will deliver remarks at an event in New York, and the Federal Reserve will release a statement concerning the discount rates to be charged to Federal Reserve Banks.

US crude prices jumped 5.7 percent on Friday and pushed above the symbolic $40 level over the weekend. The surge was in reaction to the EIA inventory report earlier in the week, which showed a sharp decline of 4.9 billion in crude stockpiles. With oil producers meeting for a crucial meeting in Doha next week, hopes are growing that the oil market may finally be tightening, and this has bolstered crude prices. If participants at the Doha gathering succeed in setting production limits, oil prices could stabilize. However, previous attempts to reach an agreement to cap output have failed. With many producers, including Iran, interested in ratcheting up production to increase oil revenues, it’s questionable whether we will see any dramatic breakthroughs at the Doha meeting.

On Thursday, with the markets still digesting the Fed’s dovish minutes, New York Federal Reserve president William Dudley stated that the Fed needed to approach future rate hikes with caution. Dudley reiterated Fed chair Yellen’s recent comments that although domestic growth was steady, the US economy remained prone to risks due to turbulent conditions in the global economy. Yellen’s dovish statements have dampened speculation about an April rate hike, which had been stoked by recent hawkish statements from several Fed officials. The Fed minutes showed strong differences of opinion among policymakers, with some members in favor of an April hike. As well,there was a split amongst members as to whether the recent pickup in inflation was sustainable. Many Fed members were worried about the lack of options available to the Fed since rates remain close to zero. This concern can have significant impact on the currency markets, since the dollar could strengthen if the Fed is unable to implement effective easing measures. What’s next from the Fed? A rate hike in April is highly unlikely, and a move in June will depend on economic data, in particular employment and inflation numbers.

WTI/USD Fundamentals

Monday (April 11)

• 8:30 US Treasury Secretary Jack Lew Speaks
• 9:25 US FOMC Member William Dudley Speaks
• Tentative – Federal Reserve Announcement

WTI/USD for Monday, April 11, 2016

WTI/USD April 11 at 11:20 DST

Open: 40.20 Low: 39.25 High: 40.74 Close: 40.25

WTI/USD Technical

• WTI/USD has posted small losses in the Asian session but recovered in European trade. The pair has been choppy in North American trade
• 40.00 was tested earlier in support and is a weak line
• There is resistance at 43.45

Further levels in both directions:

• Below: 40.00, 37.75, 35.09 and 32.22
• Above: 43.45, 46.69 and 50.13

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