US Crude Steady, Richmond Manufacturing Index Surges

US crude futures are showing marginal change on Tuesday, trading at $41.39 a barrel in the North American session. Brent crude futures are trading at almost at an identical price of $41.65. In economic news, the US House Price Index improved to 0.5%, matching the forecast. As well, the US released two manufacturing reports. Manufacturing PMI came in at 51.4 points, within expectations. The Richmond Manufacturing Index sparkled, jumping 22 points. This easily beat the estimate of -1 point.

Last week crude pushed above the symbolic level of $40, and climbed on Friday to a high of $42.51, its highest level since early December. Crude rallied last week after the Federal Reserve meeting, in which the Fed did not raise interest rates and issued a very dovish policy statement. Crude prices also gained ground on the news that Qatar will host a meeting of oil producer nations on April 17 to discuss freezing outputs. Previous efforts at capping production have not succeeded, with producers unable to reach agreement. Will we see a different outcome this time around? Libya, a member of OPEC, has already announced that it will boycott the meeting. Iran has not indicated whether it will attend, but has made clear that it is opposed to a cut in output. Iran was shut out of international markets until January, due to international sanctions, and is eager to regain its status as a major oil exporter.

Will the real Federal Reserve please stand up? Last week’s Federal Reserve policy statement appeared to pour cold water on any imminent rate hikes, but “not so fast”, according to two Federal Reserve officials. On Monday, John Williams, president of the San Francisco Fed, said that the Fed could raise rates in April and June, if economic conditions improve. Although the dot plot (an FOMC projection of rate hikes) was lowered at the March meeting, he insisted that the Fed had not changed its path of rate hikes. His comments were echoed by Atlanta Fed Dennis Lockhart, who also said that an April rate move was a clear possibility. Lockhart noted that the US economy was holding up well, despite weak global conditions. Lockart said that the economy was close to full employment and the Fed’s target of 2 percent inflation was attainable. However, it should be kept in mind that neither Willams nor Lockhart is a voting member of the FOMC. The markets will be hoping to learn more about the Fed’s plans from two other Fed presidents who will speak on Tuesday, Charles Evans and Patrick Harker.

WTI/USD Fundamentals

Tuesday (March 22)

• 9:00 US HPI. Estimate 0.5%. Actual 0.5%
• 9:45 US Flash Manufacturing PMI. Estimate 51.6 points. Actual 51.4 points
• 10:00 US Richmond Manufacturing Index. Estimate -1 points. Actual 22 points

*Key events are in bold

*All release times are DST

WTI/USD for Tuesday, March 22, 2016

WTI/USD March 22 at 12:25 DST

Open: 41.63 Low: 40.77 High: 41.90 Close: 41.65

WTI/USD Technical

• There is resistance at 43.45
• 40.00 continues to provide support

Further levels in both directions:

• Below: 40.00, 37.75, 35.09 and 32.22
• Above: 43.45, 46.69 and 50.89

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