US crude continues to have a quiet week, as WTI Crude is trading at $48.22 in the North American session. Brent crude is trading at $49.67, for a premium of $1.45. On the release front, Core Retail Sales matched the forecast with a gain of 0.4%, while Retail Sales edged above the forecast, climbing 0.5%. On Wednesday, the Federal Reserve will release its rate statement, with the markets expecting no change to interest rate levels. The US will also release PPI, which measures inflation in the manufacturing sector.
With WTI Crude steadily improving and currently trading close to the $50 level, US shale producers are once again drilling, and this increase in supply could lead to US crude reversing directions and losing ground. If US crude prices head closer to $60, we are likely to see more shale rigs return to production. Meanwhile, OPEC said on Tuesday that it expects oil prices to drop in the second half of 2016, as shutdowns in Nigeria and Canada are expected to lead to tighter supplies than expected . Still, OPEC does not expect prices to move significantly higher, as the cartel acknowledged that the there is a massive oversupply of oil, which is weighing on oil prices.
The Federal Reserve returns to the spotlight on Wednesday, as the Fed concludes its policy meeting with a rate statement. The markets have written off a rate hike in June, while a July move remains unlikely, according to the CME Group. The chances of a June hike are just 1.9% compared to a 26.3% in May. The chances of a July hike is 17.9%, compared to 43.2% in May. The sharp drop in market sentiment for a rate hike can be attributed to the dismal US Nonfarm Payrolls report as well as some backpedaling by Fed over the past few weeks. Back in April, Fed chair Janet Yellen had renewed hopes of rate hike in the summer, when she said that she expected a rate hike in “the coming months”. Since then, Yellen has sounded more cautious, and in a recent speech she was careful to avoid a time frame regarding a rate hike. To be fair, the Fed has made a strong effort to communicate clearly with the markets, and has stated that the timing of a rate hike would be data-dependent. With the US economy posting some mixed numbers and inflation levels remaining at low levels, it should not come as a surprise that the Fed may stay on the sidelines until September or even later. Although it’s extremely unlikely that the Fed will make a move in June, the markets will be carefully monitoring the rate statement, looking for some clues regarding a July rate hike.
Tuesday (June 14)
- 5:55 US NFIB Small Business Index. Estimate 93.8. Actual 93.8
- 8:30 US Core Retail Sales. Estimate 0.4%. Actual 0.4%
- 8:30 US Retail Sales. Estimate 0.4%. Actual 0.5%
- 8:30 US Import Prices. Estimate 0.8%. Actual 1.4%
- 10:00 US Business Inventories. Estimate 0.2%. Actual 0.1%
Upcoming Key Events
Wednesday (June 15)
- 8:30 US PPI. Estimate 0.3%
- 14:00 US FOMC Economic Projections
- 14:00 US FOMC Statement
- 14:00 US Federal Funds Rate. Estimate <0.50%
- 14:30 US FOMC Press Conference
*Key events are in bold
*All release times are EDT
WTI/USD for Tuesday, June 14, 2016
WTI/USD June 14 at 12:00 EDT
Open: 48.40 Low: 48.02 High: 48.69 Close: 48.22
- WTI/USD is showing limited movement in the Tuesday session
- 46.69 is providing support
- There is resistance at 50.13
Further levels in both directions:
- Below: 46.69, 43.45 and 39.32
- Above: 50.13, 53.50, 56.79 and 60.68
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