US Crude Oil Pushes Above $33, US Consumer Confidence Next

US crude has posted gains on Monday, as March futures trade at $33.46 in the North American session. Brent crude futures are trading $34.65. On the release front, it’s a slow start to the week, with only one event on the schedule. US Flash Manufacturing PMI slipped to 51.0, below expectations. On Tuesday, the US releases CB Consumer Confidence, with the markets expecting a slight drop to 97.4 points.

US crude prices kicked off the week on a positive note, but any optimism about a crude rally is likely premature, based on a bleak report issued by the International Energy Agency (IEA). In its medium term report, which provides a 5-year projection, the agency said that oil prices are unlikely to show any significant rise before 2017, and any price rise will be gradual due to the huge inventories which have filled storage facilities to capacity across the globe, including those in the US. The IEA did not mince words in its assessment, stating that “today’s oil market conditions do not suggest that prices can recover sharply in the immediate future – unless, of course, there is a major geopolitical event”. Saudi Arabia and Russia have shown willingness to lower production, but Iran has been far less flexible, as it is desperate for cash and is looking to grab as much market share as possible following a long absence as an oil exporter.

The US wrapped up last week with positive news on the inflation front. CPI came in at 0.0%, and Core CPI improved to 0.3%, marking the strongest gain since April 2015. These readings are certainly not strong, but managed to beat their estimates, so speculation has increased that the Fed may reconsider a rate hike in March. However, such a move still seems unlikely, unless inflation picks up dramatically. Earlier in the week, the Federal Reserve sent out a cautious message in its minutes, which reiterated the central bank’s concern that turmoil in global markets could have negative repercussions for the US economy. Policymakers sent out a broad hint that a rate hike is unlikely in March, as they discussed “altering their earlier views of the appropriate path for the target range for the federal funds rate”. This could have a negative impact on the US dollar, as investors may look elsewhere to park their funds if US rates are not moving higher anytime soon. Federal Reserve chair Janet Yellen said last week that the Fed still planned to raise rates later in 2016, but FOMC member James Bullard argued that there was room to delay any rate moves, given global financial turmoil and weak US inflation. Many experts are skeptical that the Fed will make any more moves before next year, but central banks have a way of surprising the markets.

WTI/USD Fundamentals

Monday (Feb. 22)

• 9:45 US Flash Manufacturing PMI. Estimate 52.3 points. Actual 51.0 points

Upcoming Key Events

Tuesday (Feb. 23)

• 10:00 US CB Consumer Confidence. Estimate 97.4 points

*Key events are in bold

*All release times are EST

WTI/USD for Monday, February 22, 2016

WTI/USD February 22 at 11:00 EST

Open: 31.86 Low: 31.75 High: 33.84 Close: 33.46

WTI/USD Technical

• WTI/USD has shown steady upward movement over the course of the day
• 32.22 is a weak support line
• There is resistance at 35.09

Further levels in both directions:

• Below: 32.22, 30.00, 26.64 and 22.88
• Above: 35.09, 37.75 and 40.00

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