WTI/USD – Crude Pushes Above $54 as Markets Eye Upcoming OPEC Cuts

US crude futures have posted small gains on Wednesday, trading at $54.16 in the North American session. Brent crude futures are trading at $56.35, as the Brent premium stands at $2.19. On the release front, Pending Home Sales posted a sharp decline of 2.5%, well off the estimate of a 0.6% gain. On Thursday, the US will release Crude Oil Inventories and Unemployment Claims.

Crude prices remain strong, as the recent agreement between OPEC and other oil exporters, which calls for production cuts, is expected to begin on January 1. Under the agreement, production is expected to drop 1.8 million barrels per day. Saudi Arabia, OPEC’s largest producer, has agreed to bear most of the cuts in production. However, even if oil exporters abide by their commitments under the deal, it’s questionable if crude prices will continue to rise, as US shale producers are likely to step in if oil prices move above the $60 level.

As 2016 wraps up, US consumers are brimming with confidence, in what analysts are describing as a post-election surge in optimism. The CB Consumer Confidence report surged in December to 113.7, its highest level since August 2001. This reading comes on the heels of UoM Consumer Sentiment, which climbed to a 12-year high, with a reading of 93.8 points. Clearly, consumers are optimistic that the economy will continue to improve under Donald Trump. Both of these well-respected surveys found that consumers are confident that continuing economic growth will create new jobs and raise incomes. Trump’s economic platform remains short on details, but he has promised to cut taxes while increasing public spending. If Trump manages to implement both of these goals, the US economy could heat up and also help global growth pick up speed. In late November, the OECD revised upwards its 2017 growth projections for the US from 2.1% to 2.3%.

The US economy continues to impress, as underscored by the most recent revision to third quarter GDP. The Final GDP reading of 3.5% beat the estimate of 3.3%. This figure marked an upward revision of the previous GDP estimate of 3.2%. The stellar reading can be attributed to stronger consumer spending and an increase in business investment, and marked the strongest growth rate since the third quarter of 2015. With consumer confidence at high levels and the labor market close to capacity, fourth quarter GDP readings could follow suit with strong numbers.

WTI/USD Fundamentals

Wednesday (December 28)

• 10:00 US Pending Home Sales. Estimate +0.6%. Actual -2.5%

Thursday (December 29)

• 8:30 US Unemployment Claims. Estimate 277K
• 11:00 US Crude Oil Inventories

*All release times are EST

*Key events are in bold

WTI/USD for Wednesday, December 28, 2016

WTI/USD December 28 at 11:20 EST

Open: 53.81 High: 54.19 Low: 53.57 Close: 54.16

WTI USD Technical

• WTI/USD was flat in the Asian session. In European trade, the pair posted slight gains but then retracted. The pair has posted slight gains in the North American session
• 52.22 remains a weak support level
• 58.32 is the next resistance line

Further levels in both directions:

• Below: 52.22, 46.54, 40.57 and 33.22
• Above: 58.32, 65.05 and 72.99

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