US Crude Under Pressure at $39

US crude futures have lost ground on Monday, trading at $39.02 a barrel in the North American session. Brent crude futures are trading at a slight premium, at $39.71. In economic news, US Core PCE Price Index and Personal Spending both posted small gains of 0.1 percent, within expectations. US Pending Home Sales posted a strong gain of 3.5 percent, well above the estimate of 1.2%. On Tuesday, the US releases CB Consumer Confidence, and Janet Yellen will deliver remarks at a meeting in New York.

The US economy continues to expand but has slowed down. Final GDP posted a gain of 1.4 percent in the fourth quarter, supported by a climb in household spending, a key driver of economic growth. This figure beat the estimate of 1.0 percent, but was lower than the 2.0 percent gain in Q3. With the global slowdown taking a bite out of US exports, strong consumer spending has been the engine behind the economy’s growth. The economy grew at a pace of 2.0 percent in 2015, identical to the figure of 2014. What can we expect for the first quarter of 2016? The financial markets were in turmoil in the early weeks of the year, so GDP in Q1 will be hard-pressed to post similar numbers.

US durable numbers declined in February, indicative of a struggling manufacturing sector. Core Durable Goods Orders posted a decline of 1.0%, well short of the forecast of a 0.2% drop. This marked the indicator’s third decline in four months. Durable Goods Orders was even worse, with a reading of -2.8%, slightly above the estimate of -3.0%. This slowdown is reflective of weak global demand, which has had a strong negative impact on the manufacturing sectors of developed economies worldwide, including the US.

A flurry of hawkish statements from Federal Reserve members last week resulted in broad gains for the US dollar. After a dovish policy statement from the Fed, a market hike did not seem likely until before June. The markets have quickly changed this assessment after some Fed officials called for an April hike. The markets will be all ears as Fed chair Janet Yellen delivers a speech in New York on Tuesday, and the dollar could jump if Yellen does not rule out an April move.

WTI/USD Fundamentals

Monday (March 28)

• 8:30 US Core PCE Price Index. Estimate 0.2%. Actual 0.1%
• 8:30 US Personal Spending. Estimate 0.2%. Actual 0.1%
• 8:30 US Goods Trade Balance. Estimate -62.3B
• 8:30 US Personal Income. Estimate 0.1%. Actual 0.2%
• 10:00 US Pending Home Sales. Estimate 1.2%. Actual 3.5%

Upcoming Key Events

Tuesday (March 29)

• 10:00 US CB Consumer Confidence. Estimate 93.9 points

WTI/USD for Monday, March 28, 2016

WTI/USD March 28 at 11:30 DST

Open: 39.91 Low: 38.99 High: 40.15 Close: 39.02

WTI/USD Technical

• 37.75 continues to provide support
• There is resistance at $40.00

Further levels in both directions:

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

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