Oil Steady at $40, US Jobless Claims Improve

US Crude is showing limited movement on Thursday, trading at $40.00 a barrel early at the start of the North American session. In the US, Unemployment Claims improved to 271 thousand, very close to the estimate. Later in the day, we’ll get a look at the Philly Fed Manufacturing Index. On Wednesday, the Federal Reserve released the minutes of its most recent policy meeting, as the markets prepare for a possible rate hike in December.

All eyes were on the Fed minutes of the October 28 policy meeting, which were released on Wednesday. However, there were no surprises from the Fed, and the markets didn’t show much movement after the release. At the meeting, a majority of Fed members said they were in favor of a rate hike in December. The minutes also noted that employment numbers had weakened in recent months, but analysts pointed out that this was prior to the stellar Nonfarm Payrolls report in October. On the inflation front, the minutes stated that Fed policymakers were confident that inflation would remain at stable levels.

The Fed minutes were non-committal regarding a December rate hike, but most analysts believe that the long-awaited move will indeed occur next month. Market expectations have risen to 66% that the Fed will make a move next month. Chris Rupkey, chief financial economist at Bank of Tokyo Mitsubishi, Japan’s largest bank, said he would be “astounded” if the Fed did not raise rates at their next meeting on December 16, especially in light of the strong Nonfarm Payrolls report in October. One major weak spot in the economy is that of weak inflation levels, and the Fed has repeatedly stated that inflation is a prime factor in its decision-making process. Last week’s PPI was awful, posting a second straight decline. On Tuesday, CPI and Core CPI posted small gains of 0.2%, matching the forecast. Are these lukewarm readings enough to convince a majority of Fed members to vote in favor of a hike? Time will tell. Another important factor which must be remembered is that the markets now seem prepared for a small hike of 0.25% or 0.50%, and there is a growing view that a modest move would not cause unwanted turbulence on the global markets.

The US economy continues to show improvement in most areas, but the manufacturing sector continues to lag behind. Earlier this week, the Empire State Manufacturing Index posted its fourth straight decline, underlining worsening conditions in the manufacturing sector. In November, the indicator came in at -10.7 points, weaker than the forecast of -5.3 points. On Thursday, we’ll get another look at manufacturing data, with the release of the Philly Fed Manufacturing Index. This indicator has also struggled, posting two straight declines. The markets are expecting some improvement in the November report, with an estimate of 0.1 points.

WTI/USD Fundamentals

Thursday (Nov. 19)

•  13:30 US Unemployment Claims. Estimate 272K. Actual 271K
• 15:00 US Philly Fed Manufacturing Index. Estimate 0.1 points
• 15:00 US CB Leading Index. Estimate 0.5%
• 15:30 US Natural Gas Storage. Estimate 23B
• 17:30 FOMC Member Dennis Lockhart Speaks
• 21:45 FOMC Member Stanley Fischer Speaks

*Key releases are highlighted in bold

*All release times are GMT

WTI/USD for Thursday, November 19, 2015

WTI/USD November 19 at 13:30 GMT

WTI/USD 40.10 H: 41.00 L: 39.97

XAU/USD Technical

• WTI/USD showed limited movement in the Asian session and has posted slight losses in the European session.
• 39.87 is providing support.
• 42.59 is the next line of resistance.

Further levels in both directions:

• Below: 39.87, 37.75 and 35.09
• Above: 42.59, 44.30, 47.04 and 49.06

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