WTI/USD – US Crude Slumps as OPEC Agreement in Doubt

US crude has posted sharp losses in the Monday session. In North American trade, WTI/USD futures are trading at $47.01 per barrel. Brent futures are trading at $48.84, as the Brent premium stands at $1.83. On the release front,  Personal Spending posted a gain of 0.5%, matching the forecast. Chicago PMI dipped to 50.6 points, well off the forecast of 54.1 points. On Tuesday, the US will publish ISM Manufacturing PMI, with an estimate of 51.8 points.

The proposed OPEC agreement to cap production has run into a snag, sending oil prices into a tailspin. US crude is down 2.7 percent on Monday, as OPEC members met on Friday but failed to make any headway towards an agreement. “There was a lot of talk and nobody managed to agree on anything. That has been pushing the market down,” said Jeffrey Halley, senior market analyst at OANDA in Singapore. OPEC has invited Russia and other exporters to join the OPEC initiative, but non-OPEC countries have made no commitments so far. OPEC will meet in Vienna on November 30 in the hopes of hammering out an agreement, so traders can expect volatility in oil prices in the coming weeks. Previous attempts by OPEC to set limits on each member have failed, so it’s questionable if the cartel will have more success this time around.

In the US, there was positive news from the consumer front on Monday, as Personal Spending rebounded with a 0.5% gain in September, after a flat reading of 0.0% in August. This release comes on the heels of a disappointing consumer spending report on Friday, as UoM Consumer Sentiment fell to 87.2 points in October, below expectations and its lowest level since August 2015. US Advance GDP jumped 2.9 percent in the third quarter, and the rosy number will be great news for Fed policymakers who want to raise rates in December. Currently, a hike is priced in at around 70 percent. The US economy remains strong, buoyed by a labor market that is close to capacity, with unemployment at a healthy 5.0%. Inflation levels, however, remain low and are unlikely to show much improvement in the next few months. Although the Fed would prefer stronger inflation, other economic indicators remain strong enough such that the lack of inflation is unlikely to be the critical factor in the Fed rate decision. The Fed will also hold a policy meeting in early November, but is unlikely to make any rate moves just before the US presidential election.

WTI/USD Fundamentals

Monday (October 31)

• 8:30 US Core PCE Price Index. Estimate 0.1%. Actual 0.1%
• 8:30 US Personal Spending. Estimate 0.5%. Actual 0.5%
• 8:30 US Personal Income. Estimate 0.3%. Actual 0.3%
• 9:45 US Chicago PMI. Estimate 54.1. Actual 50.6
• Tentative – US Loan Officer Survey

Tuesday (November 1)

• 10:00 US ISM Manufacturing PMI. Estimate 51.8

*All release times are EDT

*Key events are in bold

WTI/USD for Monday, October 31, 2016

WTI/USD October 31 at 13:30 EDT

Open: 48.40 High: 48.72 Low: 47.03 Close: 47.08

WTI USD Technical

WTI/USD was flat in the Asian and European sessions. The pair has posted sharp losses in the North American session

• 46.69 is providing weak support. This line could break in the North American session
• There is resistance at 50.13

Further levels in both directions:

• Below: 46.69, 43.45 and 38.38
• Above: 50.13, 53.50, 59.69 and 65.49

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