US crude posted sharp gains in the Tuesday session but was unable to consolidate and has surrendered these gains. In North American trade, US crude futures are trading at $53.93. Brent crude futures are trading at $55.96, as the Brent premium has narrowed to $2.03. On the release front, ISM Manufacturing PMI rose to 54.7 points. On Wednesday, the Federal Reserve will publish the minutes of its last policy meeting.
Crude prices continue to move higher, and US crude shot past the $55 level on Tuesday before retracting. This marked the highest level for US crude since July 2015. Oil prices have been buoyed by the recent agreement between OPEC and other oil exporters, which calls for production cuts, took effect on January 1. In December, OPEC surprised the markets as members agreed to cut or limit production levels. This was quickly followed by a deal with Russia and other oil producers to cut production. These reductions took effect on January 1, so we could see oil prices continue to rise, provided that the countries bound by the agreement. However, markets analysts are not expecting a huge jump in oil prices, as US shale producers are likely to step in and increase production if oil prices move above the $60 level.
The spotlight will be on the Federal Reserve on Wednesday, with the release of the minutes from the December policy meeting, when the Fed finally raised rates for the first time since December 2015. Analysts will be combing through the minutes, looking for clues regarding future monetary policy. The US economy is performing very well, and the markets are hopeful that this continues as Donald Trump takes office. Trump’s economic policies remain sketchy, although he has promised to increase fiscal spending while lowering taxes. If the economy’s positive momentum continues in early 2017, the Fed could be inclined to raise rates another quarter point in order to prevent the economy from overheating. A rate hike would likely lead to broad gains for the US dollar.
Tuesday (January 3)
- 9:45 US Final Manufacturing PMI. Estimate 54.2. Actual 54.3
- 10:00 US ISM Manufacturing PMI. Estimate 53.7. Actual 54.7
- 10:00 US Construction Spending. Estimate 0.5%. Actual 0.9%
- 10:00 US ISM Manufacturing Prices. Estimate 55.6. Actual 65.5
Wednesday (January 4)
- 14:00 US FOMC Meeting Minutes
*All release times are EST
* Key events are in bold
WTI/USD for Tuesday, January 3, 2017
WTI/USD January 3 at 11:40 EST
Open: 53.95 High: 55.22 Low: 53.85 Close: 53.93
WTI USD Technical
- WTI/USD was flat in the Asian session. The pair posted strong gains in the European session but has given up these gains in North American trade
- 52.22 remains a weak support level
- 58.32 is the next resistance line
Further levels in both directions:
- Below: 52.22, 46.54, 40.57 and 33.22
- Above: 58.32, 65.05 and 72.99
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