US Crude Slightly Lower Ahead of Doha Meeting

US crude futures have posted slight losses on Friday. US crude is trading at $40.14 per barrel in the North American session. Brent crude futures are trading at $42.46, as the Brent premium stands at $2.32. In economic news, today’s key event is UoM Consumer Sentiment, with the estimate standing at 91.9 points. As well, the US releases two important manufacturing reports – the Empire State Manufacturing Index and Industrial Production.

All eyes are on the oil producers meeting, which will take place on April 17 in Doha, Quatar. At least 15 nations (OPEC and non-OPEC countries) have announced that they will participate in the meeting. Participants will be looking to cap production limits and curb the huge worldwide glut of oil. There has been plenty of press and speculation leading up to Sunday’s meeting, but it’s questionable whether the event will have raise oil prices, which have plunged in the past year. With many producers, including Iran, interested in ratcheting up production to increase oil revenues, the meeting may end up with little more than a “soft agreement” which doesn’t change fundamentals. On Thursday, the International Energy Agency (IEA) added its doubts, saying that even if producers agree to freeze production around current levels, this will have a “limited impact” on global supply, which is likely to remain mired in an oversupply until 2017, according to the IEA.

US consumer inflation indicators remained subdued in March. CPI and Core CPI, key gauges of consumer inflation, posted small gains of 0.1%. The Core CPI release was particularly disappointing, coming after two consecutive gains of 0.3%. The weak inflation numbers will make it difficult to make a case for raising interest rates in the first half of 2016 and bolsters the dovish position of Janet Yellen and her supporters. Deustche Bank analyst Brett Ryan summed up the soft US inflation picture, noting that “we’re still importing deflation from other areas of the world”. There was much better news on the employment front, as Unemployment Claims fell to 253 thousand, its lowest weekly reading since March 1973. This release is another confirmation of a robust US labor market.

The US economy continues to perform well, despite some weak sectors, such as the manufacturing industry. US manufacturers continue to face stiff competition with countries that pay much lower wages, such as China, India, Bangladesh and other Asian countries. With turbulent global economic conditions leading to weaker demand, the manufacturing sector is facing additional challenges. The Empire State Manufacturing Index has recorded mostly sharp declines since the second half of 2015, but the markets are hoping for a gain in the March report.

WTI/USD Fundamentals

• 8:30 US Empire State Manufacturing Index. Estimate 2.1 
• 9:15 US Capacity Utilization Rate. Estimate 75.4%
• 9:15 US Industrial Production. Estimate -0.1%
• 10:00 US Preliminary UoM Consumer Sentiment. Estimate 91.9
• 10:00 US Preliminary UoM Inflation Expectations
• 16:00 US TIC Long-Term Purchases

*Key events are in bold

*All release times are DST

WTI/USD for Friday, April 15, 2016

WTI/USD April 15 at 10:30 DST

Open: 41.38 Low: 40.05 High: 41.72 Close: 40.14

WTI/USD Technical

• WTI/USD has shown limited movement in the Asian and European sessions
• 40.00 continues to provide support
• There is resistance at 43.45

Further levels in both directions:

• Below: 40.00, 37.75, 35.09 and 32.22
• Above: 43.45, 46.69 and 50.13

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