WTI/USD – US Crude Climbs to 4-Week High as Producers Talk Output Freeze

US crude continues to point upwards this week, continuing the rally which started late last week. In Tuesday’s North American session, WTI/USD futures are trading at $46.28. Brent crude has improved to $48.96, as the Brent premium has widened to $2.68. On the release front, it’s been a busy day in the US. CPI posted a flat reading of 0.0%, while Core CPI gained 0.1%. Building Permits came in at 1.15 million, very close to the forecast. On Wednesday, the FOMC will publish the minutes of its July policy meeting.

US crude is on fire in August, as the commodity has soared 13.3% this month. Crude has pushed above the $46 level and is currently trading at its highest level since July 13. Oil producers continue to discuss imposing a ceiling on output in order to stabilize oil prices. OPEC members are planning to meet in Algiers in late September, and if an agreement to curb production is reached, supplies would be reduced and crude prices would move upwards. However, these oil summits have usually ended without an agreement, as was the case at an OPEC meeting earlier this year. Iran, which has returned as a major producer after years of sanctions, scuttled the meeting and is unlikely to be agreeable to any cuts in production. Still, a number of producers have expressed a willingness to discuss a ceiling output, and we’re likely to see volatility from crude leading up to the September meeting.

In the US, inflation numbers remain anemic. CPI came in at 0.0%, matching the forecast. This marked the first time the key index has failed to post a monthly gain since February, and will raise concerns of deflation in the economy. Core CPI posted a negligible gain of 0.1%, shy of the estimate of 0.2%. The disappointing consumer inflation data, which comes on the heels of soft retail sales reports, makes it very unlikely that the Fed will raise rates in September. Strong employment numbers, led by a stellar NFP report, had raised the odds of a September hike. The Fed has made it clear that any decision to raise rates will be data dependent, so it’s hard to see a case for a rate hike next month, with inflation levels close to zero. This means that we can expect the Federal Reserve to remain on the sidelines until December or even later.

WTI/USD Fundamentals

Tuesday (August 16)

• 8:30 US Building Permits. Estimate 1.16M. Actual 1.15M
• 8:30 US CPI. Estimate 0.0%. Actual 0.0%
• 8:30 US Core CPI. Estimate 0.2%. Actual 0.1%
• 8:30 US Housing Starts. Estimate 1.18M. Actual 1.21M
• 9:15 US Capacity Utilization Rate. Estimate 75.7%. Actual 75.9%
• 9:15 US Industrial Production. Estimate 0.2%. Actual 0.7%

Wednesday (August 17)

• 14:00 US FOMC Meeting Minutes

*Key events are in bold

*All release times are EDT

WTI/USD for Tuesday, August 16, 2016

WTI/USD August 16 at 12:10 EDT

Open: 45.59 High: 46.58 Low: 45.35 Close: 46.28

WTI USD Technical

• WTI/USD was flat in the Asian session. The pair has posted slight gains in the European and North American sessions
• 46.69 is a weak resistance line
• 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

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