Crude Hugging $42, Markets Eye PMI, Housing Reports

US Crude has started the new trading week on a quiet note, as crude trades at $42 a barrel in Monday’s European session. In economic news, there are no major US releases, with just two events on the schedule – Chicago PMI and Pending Home Sales.

Crude oil will be happy to bid adieu to the month of November, during which time the price of oil plunged some 12 percent. With China and other emerging countries struggling with an economic slowdown, oil supplies continue to far outstrip global demand. Oil is floundering at $42 per barrel, its lowest level since August. The continuing glut has increased pressure on producers to scale back production, but this hasn’t occurred, despite the predictable plunge in oil prices. Saudi Arabia and other OPEC members appear determined to maintain current production level, so as not to lose their market share. If this situation continues, we could see oil drop below $30 a barrel as early as next year. With this background, the markets will be keeping a close eye on the OPEC meeting on Friday. If, as expected, OPEC members don’t take any concrete action, traders can expect oil prices to drop towards the symbolic $40 level.

With the US continuing to post strong job numbers, speculation has increased that the Federal Reserve will change course and raise interest rates for the first time in ten years. Unemployment Claims were down sharply last week, and even a lukewarm Nonfarm Payroll report late in the week should not present an obstacle for the Fed. One nagging concern is that of low inflation levels, as the Fed has noted in the past that inflation is an important factor in the rate decision process. We’ll get a look at one more round of CPI and PPI reports prior to the Fed policy meeting on December 16, and these releases could cause some volatility in the markets if they are not close to the estimates. Meanwhile, the guessing game continues, and the markets will be closely following every key release and comments from Fed members in the two weeks leading up to the critical December policy meeting.

WTI/USD Fundamentals

Monday (Nov. 30) 

• 14:45 US Chicago PMI. Estimate 54.3 points
• 15:00 US Pending Home Sales. Estimate 1.6%

Upcoming Key Events

Tuesday (Dec. 1) 

• 15:00 US ISM Manufacturing PMI. Estimate 50.6 points

*Key releases are highlighted in bold

*All release times are GMT

WTI/USD for Monday, November 30, 2015

WTI/USD November 30 at 12:30 GMT

WTI/USD 42.04 H: 43.35 L: 41.51

XAU/USD Technical

• WTI/USD was flat in the Asian and European sessions.
• 39.87 is providing strong support.
• 42.59 remain busy and has switched to a resistance role.

Further levels in both directions:

• Below: 39.87, 37.75 and 35.09
• Above: 42.59, 44.30, 47.04 and 49.06

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