US Crude Unchanged as Markets Closed for US Memorial Day

US crude is unchanged on Monday, continuing the lack of movement which has characterized the commodity since late last week. Crude is trading at $49.47 in the North American session. Brent crude is trading at $50.20, for a premium of $0.83. In the US, markets are closed for Memorial Day, so there are no US releases. Due to the holiday, we can expect light trade on Monday. On Tuesday, the US releases CB Consumer Confidence.

US crude touched above the symbolic level of $50 on Thursday. This marked the first time since early October that crude is trading at this level. Meanwhile, OPEC members will meet in Vienna on Thursday. Analysts are not expecting any agreement on a production cap or new targets, given the deep animosity between Saudi Arabia and Iran. Ahead of next week’s meeting, Iraq, which is the second-largest producer in OPEC, announced that it will raise exports by 5 million barrels in June.

On Friday, the US released Preliminary GDP for the first quarter. The key indicator, which can be viewed as an economic report card, posted a gain of 0.8%, matching the forecast. This was an improvement above Advanced GDP, which came in at 0.5%. Still, the economy slowed down considerably compared to the fourth quarter of 2015. The export sector has been hurt by the strong US dollar and weak global demand. Oil prices remain low, which has taken a sharp toll on the oil industry. Elsewhere, the UoM Consumer Sentiment report improved in April, climbing to 94.7 points. This marked the indicator’s highest level in 11 months, although it was short of the estimate of 95.7 points.

Speculation continues to grow that the Federal Reserve may soon raise rates for the first time this year. The Fed minutes and comments from Fed chair Janet Yellen have renewed market sentiment that the Fed may press the rate trigger this summer, and this has bolstered the US dollar. The minutes were more hawkish than expected, resulting in strong volatility in the currency markets. Odds of a rate hike in June have sharply increased, but the Fed will be hard-pressed to raise rates if key indicators don’t show improvement, particularly inflation numbers. Last week, FOMC member John Williams reiterated that he expected the Fed to raise rates two or three times in 2016. However, there appears to be a gap between the hawkish message some FOMC members are sending out and market sentiment, as many analysts are projecting only one rate hike this year. The guessing game as to what the Fed has in mind is likely to continue into June, but it’s safe to say that another rate move will be data-dependent, so stronger US numbers will increase the likelihood of a quarter-point hike at the June policy meeting.

WTI/USD Fundamentals

Monday (May 30)

• There are no US releases on the schedule

Tuesday (May 31)

• 10:00 US CB Consumer Confidence. Estimate 96.1

*Key events are in bold

*All release times are EDT

WTI/USD for Monday, May 30, 2016

WTI/USD May 30 at 12:40 EDT

Open: 49.54 Low: 49.07 High: 49.55 Close: 49.47

WTI/USD Technical

• WTI/USD has shown limited movement in the Monday session
• 50.13 remains a weak resistance line
• 46.69 is providing support

Further levels in both directions:

• Below: 46.69, 43.45, 40.00 and 37.75
• Above: 50.13, 53.50 and 56.79

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