US Crude Subdued at $43

US crude futures are steady on Friday, continuing the limited movement which marked the Thursday session. US Crude is trading at $43.30 per barrel in the North American session. Brent crude futures are trading at $44.54, as the Brent premium has narrowed to $1.24. On the release front, there is just one US event on the schedule, Flash Manufacturing PMI.

US crude prices have shown strong volatility this week. An oil summit in Qatar on Sunday, 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 reach an agreement to freeze 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 prices initially fell after the meeting, but have since rebounded strongly. US crude has jumped 10 percent this week, moving above the $43 level. Oil prices received also received a boost from an energy report earlier in the week. The International Energy Agency has projected a sharp fall in non-OPEC production in 2016. This could help rebalance the huge oversupply of oil, which has led to a collapse in oil prices.

Oil producers may have failed to reach an agreement in Qatar, 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. A strike by Kuwaiti oil workers also contributed to volatility in the oil markets. The three-day strike, which ended on Tuesday, significantly disrupted oil production in Kuwait, a major oil producer.

The US labor market continues to impress, as the weekly unemployment claims indicator fell to 247 thousand, well below the forecast of 265 thousand. This was the lowest weekly count since November 1973, and the four-week indicator, which is considered more accurate, also dropped compared to the previous release. The good news was tempered by a disappointing key manufacturing report. The Philly Fed Manufacturing Index surprised the markets with a decline of -1.6 points, as the estimate stood at 8.1 points. This reading marked the third decline in four readings, as the manufacturing sector remains a weak area of the US economy. Uncertainty in global economic conditions has lead to weaker demand for US goods and put the squeeze on domestic manufacturers.

WTI/USD Fundamentals

Friday (April 22)

• 9:45 US Flash Manufacturing PMI. Estimate 51.9

Monday (April 25)

• 10:00 US New Home Sales

*Key events are in bold

*All release times are EDT

WTI/USD for Friday, April 22, 2016

WTI/USD April 22 at 6:50 EDT

Open: 43.30 Low: 43.11 High: 43.97 Close: 43.30

WTI/USD Technical

• WTI/USD was flat in the Asian session. The pair has posted small losses in European trade.
• 40.00 is providing support
• There is weak resistance at 43.45. This line was tested earlier and could break during the day

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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