WTI/USD – Crude Climbs as OPEC Talks Freeze

US crude has posted strong gains on Monday. In the North American session, WTI/USD futures are trading at $42.97. Brent crude is trading at $45.40, its highest level in two weeks. The Brent premium stands at $2.43. On the release front, there is just one US release on the schedule. The US Labor Market Conditions Index improved to plus-1, its first gain since January.

Crude has received a boost from OPEC members, who have again floated the idea of a freeze in output, which would lower supply and stabilize oil prices. Venezuala, Ecuador and Kuwait are pushing the idea, but Russia is so far non-committal to implementing a freeze. OPEC members will meet in late September in Algiers. If recent history is a guide, an agreement will be difficult to reach. OPEC members attempted to freeze output earlier in the year, but could not reach an agreement as Iran refused to climb on board. Oil prices showed significant volatility during that meeting, and the same trend could take place at the September summit.

The US dollar recorded broad gains on Friday, courtesy of excellent US employment numbers. Nonfarm Employment Change, one of the most important indicators, surprised the markets with a huge gain of 255 thousand, crushing the estimate of 180 thousand. US wage growth has been a soft spot in the strong labor market, but there was positive news as Average Hourly Earnings gained 0.3%, edging above the forecast of 0.2%. As well, Unemployment Claims remained steady at 4.9%. On Monday, the Labor Market Conditions Index, which provides a snapshot of labor activity, improved to plus-1, ending a nasty streak of five straight declines. These strong numbers will likely increase the odds of a September rate hike by the Federal Reserve. The Fed has made no secret of the fact that any rate move will be data-dependent, and upcoming employment and inflation reports will be critical factors in the Fed’s decision. The recent US GDP report, which was much softer than expected, had dampened speculation about a rate hike before next year, but the stellar payroll report has increased the likelihood a move by Fed before the end of the year.

WTI/USD Fundamentals

Monday (August 8)

• 10:00 US Labor Market Conditions Index. Actual plus-1

*Key events are in bold

*All release times are EDT

WTI/USD for Monday, August 8, 2016

WTI/USD August 8 at 12:50 EDT

Open: 42.02 High: 43.16 Low: 42.81 Close: 43.02

WTI USD Technical

• WTI/USD was flat in the Asian session. The pair has posted gains in the European and North American sessions
• 39.32 is providing support
• 43.45 is a weak resistance line. It could break in the North American session.

Further levels in both directions:

• Below: 39.32, 35.25 and 30.55
• Above: 43.45, 46.69, 50.13 and 53.50

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