WTI/USD – US Crude Briefly Climbs on Bullish Saudi Comments

US crude showed flexed some muscle in the Tuesday session, but was unable to consolidate the gains. In North American trade, US crude futures are trading at $52.60. Brent crude futures are trading at $55.66, as the Brent premium stands at $3.06. In economic news, the Empire State Manufacturing Index dipped to 6.5, short of the forecast of 8.1. Wednesday promises to be busy, with the US releasing key inflation data. CPI is expected to edge up to 0.3% in the December report.

Crude prices showed some strength on Tuesday, after Saudi Arabia’s oil minister, Khalid al-Falih, said that the country would strictly comply with the recent agreement by major producers to lower production levels. However, Falih said that it was unlikely that the agreement between OPEC, Russia and other producers, which ends in June, would be extended. The agreement took effect on January 1, but oil prices have actually dropped about 2 percent during that time. Are oil producers complying with the agreement? We could get some answers during the week, as OPEC releases its monthly oil report on Wednesday, while the International Energy Agency publishes its weekly report on Thursday.

As the US ushers in the New Year and a new president, the American consumer remains very optimistic. The UoM Consumer Sentiment in January was solid, although the markets had expected a stronger performance. The indicator was almost unchanged at 98.1, shy of the forecast of 98.6. Despite the optimism, US retail sales were a mix during the December holiday season. Retail Sales improved to 0.6%, edging above the estimate of 0.5%. However, much of the increase in spending was attributable to automobile sales, at the expense of other sectors of the economy. This was reflected in Core Retail Sales (which excludes car sales), which remained stuck at 0.2%, compared to a forecast of 0.5%. Still, analysts are confident that a bullish consumer will translate into strong spending numbers in the next few months. There was good news on the inflation front, as wholesale prices (measured by PPI) rose 0.3%, beating the forecast of 0.1%. This marked the third rise in four months, as inflation is pointing upwards due to higher oil prices. If inflation continues to climb towards the Federal Reserve target of 2.0%, we could see the Fed step in and raise interest rates. Last week, FOMC member Patrick Harker took note of the strong US economy and projected three “modest” rates from the Fed in 2017.

WTI/USD Fundamentals

Tuesday (January 17)

• 8:30 US Empire State Manufacturing Index. Estimate 8.1. Actual 6.5
• 8:45 US FOMC Member William Dudley Speaks
• 10:00 US Treasury Secretary Jack Lew Speaks
• 10:00 US FOMC Member Lael Brainard Speaks

Wednesday (January 18)

• 8:30 US CPI. Estimate 0.3%
• 8:30 US Core CPI. Estimate 0.2%

WTI/USD for Tuesday, January 17, 2017

WTI/USD January 17 at 11:25 EST

Open: 52.52 High: 53.53 Low: 52.26 Close: 52.60

WTI/USD Fundamentals

Tuesday (January 17)

• 8:30 US Empire State Manufacturing Index. Estimate 8.1. Actual 6.5
• 8:45 US FOMC Member William Dudley Speech
• 10:00 US Treasury Secretary Jack Lew Speech
• 10:00 US FOMC Member Lael Brainard Speaks

Wednesday (January 18)

• 8:30 US CPI. Estimate 0.3%
• 8:30 US Core CPI. Estimate 0.2%

WTI USD Technical

• WTI/USD was flat in the Asian session. The pair recorded strong gains in European trade but has given up these gains in the North American session
• 52.22 remains a weak line
• 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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