WTI/USD – Crude Rally Continues, Breaks Above $45

US crude has posted sharp gains on Monday, continuing the rally which started late last week. In the North American session, WTI/USD futures are trading at $45.61. Brent crude has improved to $47.95, as the Brent premium stands at $2.34. On the release front, it was a quiet start to the week. The Empire State Manufacturing Index dropped 4.2 points, well below expectations. On Tuesday, the US will release CPI and Building Permits.

US crude prices have jumped some 10% since Wednesday, buoyed by sentiment that the oil market will soon tighten and push prices upwards. Crude jumped $1.00 on Thursday, after the well-respected International Energy Agency (IEA) projected that oil supplies will decrease in the third quarter, despite record pumping levels from OPEC in July. The IEA added that although oil prices have dropped recently, its balances do not show an oversupply in the second of 2016, and that it expects demand to increase in the third quarter. As well, OPEC members are planning to meet in Algiers in late September, and if an agreement to curb prices is reached, supplies would be reduced and crude prices would move upwards.

US numbers wrapped up the week on a sour note, although crude prices continued to move higher. Core Retail Sales dropped 0.3%, while Retail Sales slipped to a flat 0.0%. There was no relief from PPI readings, which measure wholesale prices. PPI came in at -0.4% and Core PPI declined 0.3%. All four releases missed expectations and were lower than their previous readings. UoM Consumer Sentiment improved to 90.4 points, but this fell short of expectations. The soft PPI readings point to ongoing low inflation levels, well below the Federal Reserve’s target of about 2.0%. The Fed next meets in September to decide whether to raise interest rates. A soft GDP report last month had dampened expectations about a rate hike before 2017, but sharp employment numbers, led by a stellar NFP report, raised the odds of a September hike. However, Friday’s soft numbers have again dampened enthusiasm about a rate hike in September, and in all likelihood, the Fed will stay on the sidelines until December or even later.

WTI/USD Fundamentals

Monday (August 15)

• 8:30 US Empire State Manufacturing Index. Estimate 2.1. Actual -4.2
• 10:00 US NAHB Housing Market Index. Estimate 60. Actual 60
• 16:00 US TIC Long-Term Purchases

Tuesday (August 16)

• 8:30 US Building Permits. Estimate 1.16M
• 8:30 US CPI. Estimate 0.0%
• 8:30 US Core CPI. Estimate 0.2%

*Key events are in bold

*All release times are EDT

WTI/USD for Monday, August 15, 2016

WTI/USD August 15 at 11:55 EDT

Open: 44.60 High: 45.69 Low: 44.39 Close: 45.61

WTI USD Technical

• WTI/USD was flat in the Asian session. The pair showed limited movement in the European session and has posted strong gains in North American trade
• There is resistance at 46.69
• 43.45 is providing support

Further levels in both directions:

• Below: 43.45, 39.32, 35.25 and 30.55
• Above: 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.