US Crude Gains Ground, Pushes Above $41

US crude futures have posted gains on Tuesday, continuing the upward trend which marked the Monday session. US crude is trading at $41.22 per barrel in the North American session. Brent crude futures are trading at $44.08, as the Brent premium stands at $2.86. In economic news, Building Permits and Housing Starts both posted sharp drops and missed expectations. On Wednesday, the US releases Existing Home Sales.

Oil prices have shown strong volatility since the weekend, when oil producers attended a meeting in Qatar on Sunday. The gathering, which included OPEC and non-OPEC nations, ended in disarray, without any agreement being reached by the participants. There was optimism that the parties might agree not to exceed current production levels, but hopes for even this limited move were dashed when Saudi Arabia insisted that any agreement had to cover Iran. When this didn’t materialize, the participants closed up shop and returned home. The failure of the talks could severely undermine the credibility of oil producers, and the huge oversupply of crude could worsen if Saudi Arabia and other suppliers decide to increase output. US crude oil prices reacted sharply after the meeting, dropping 5 percent. However, oil prices have since moved sharply upwards, surging 7.8 percent. Oil producers may have failed to reach an agreement, but they managed to cause plenty of volatility in the currency markets. Commodity currencies like the Canadian and Australian dollars followed the movement of oil, posting losses immediately after the inconclusive meeting, but have since posted sharp gains.

The US economy continues to perform well despite some weak sectors, such as the manufacturing industry. US manufacturers continue to face stiff competition with countries that pay much lower wages, such as China, India, and other Asian countries. With turbulent global economic conditions leading to weaker demand, the manufacturing sector is facing additional challenges. There was some positive news on Friday, as the Empire State Manufacturing Index climbed 9.6 points in April, crushing the estimate of 2.1 points. It was the indicator’s highest level since January 2015. We’ll get a look at the Philly Fed Manufacturing Index, a key manufacturing report, on Thursday. Meanwhile, the UoM Consumer Sentiment dropped to 89.7 points in April, short of the estimate of 91.9 points. Although consumer sentiment remains high, this marked the first time since September that the indicator fell below the symbolic 90 level.

WTI/USD Fundamentals

Tuesday (April 19)

• 8:30 US Building Permits. Estimate 1.20M. Actual 1.09M
• 8:30 US Housing Starts. Estimate 1.17M. Actual 1.09M

Upcoming Key Events

Wednesday (April 20)

• 14:00 US Existing Home Sales. Estimate 5.29M

*Key events are in bold

*All release times are DST

WTI/USD for Tuesday, April 19, 2016

WTI/USD April 19 at 11:00 DST

Open: 39.78 Low: 39.60 High: 41.30 Close: 41.22

WTI/USD Technical

• WTI/USD showed strong volatility in the Asian session. The pair has moved higher in the European and North American sessions.
• 40.00 remains fluid and is a weak resistance line
• 37.75 is providing support

Further levels in both directions:

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

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