WTI/USD – Crude at 2-week High, Punches Above $43

US crude has edged higher on Tuesday, continuing the upward movement seen in the Monday session. WTI/USD futures are trading at $43.11. Brent crude is unchanged at $45.32, as the Brent premium stands at $2.21. On the release front, US indicators were mixed. Preliminary Nonfarm Productivity disappointed with a decline of 0.5%, while Preliminary Unit Labor Costs gained 2.0%, above the estimate.

Crude prices have received a boost from OPEC, as US crude rose to $43.52 on Tuesday, its highest level since July 25. The oil cartel, which has been hit hard by low oil prices, has again floated the idea of a freeze in output in order to stabilize oil prices. Venezuala, Ecuador and Kuwait are pushing the idea, but Russia is so far non-committal to implementing a freeze. OPEC members will meet in late September in Algiers. If recent history is any indication, an agreement will be difficult to reach. OPEC members attempted to freeze output earlier in the year, but could not reach an agreement as Iran refused to climb on board. The meeting resulted in significant volatility in oil prices, and the trend could repeat itself at the September summit.

The US dollar recorded broad gains on Friday, courtesy of excellent US employment numbers. The July report surprised the markets with a huge gain of 255 thousand, crushing the estimate of 180 thousand. This release follows the outstanding June reading of 280 thousand. US wage growth has been a soft spot in the robust labor market, but there was positive news as Average Hourly Earnings gained 0.3%, edging above the forecast of 0.2%. As well, Unemployment Claims remained steady at 4.9%. What will the Federal Reserve do with these numbers? Prior to the payrolls release, a September hike was virtually off the table, especially in light of the soft US GDP report in late July. The Fed has made no secret of the fact that any rate move will be data-dependent, and the stellar job numbers will force to Fed to give serious thought to a move in September. US employment and inflation releases in the next few weeks will be critical factors in determining if the Fed makes a move next month, or revisits rates in December.

WTI/USD Fundamentals

Tuesday (August 9)

• 6:00 US NFIB Small Business Index. Estimate 94.5. Actual 94.6
• 8:30 US Preliminary Nonfarm Productivity. Estimate +0.5%. Actual -0.5%
• 8:30 US Preliminary Unit Labor Costs. Estimate 1.8%. Actual 2.0%
• 10:00 US IBD/TIPP Economic Optimism. Estimate 46.2
• 10:00 US Wholesale Inventories. Estimate 0.0%

*Key events are in bold

*All release times are EDT

WTI/USD for Tuesday, August 9, 2016

WTI/USD August 9 at 12:00 EDT

Open: 42.02 High: 43.16 Low: 42.81 Close: 43.09

WTI USD Technical

• WTI/USD was flat in the Asian session. The pair posted gains in the European session and is choppy in North American trade
• 39.32 is providing support
• 43.45 is a weak resistance line. It could break in the North American session

Further levels in both directions:

• Below: 39.32, 35.25 and 30.55
• Above: 43.45, 46.69, 50.13 and 53.50

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.