WTI/USD – US Crude Slips as Hopes for OPEC Deal Fade

US crude has posted strong losses on Tuesday, erasing the gains made in the Monday session. In North American trade, WTI/USD futures are trading at $44.71 per barrel. Brent futures have dropped to $46.02, as the Brent premium stands at $1.31. In economic news, oil prices have slipped as OPEC members appear unlikely to reach an agreement to cap production. In the US, CB Consumer Confidence shot up to 104.1 points, easily beating the forecast of 98.6 points.

Oil prices continue to show volatility this week. Crude has fallen 2.1 percent on Tuesday, as key OPEC members have poured cold water on hopes of an agreement to cap production. Oil exporters have gathered in Algiers for the International Energy Forum (IEF). OPEC members are expected to meet Wednesday, on the sidelines of the IEF meeting, to discuss limiting production levels in order to stabilize oil prices. On Tuesday, Iranian Oil Minister Bijan Zanganeh appeared to rule out an agreement, stating that now was “not the time for decision-making”. The huge oversupply of oil has taken a large bite out of the oil revenues of OPEC countries and added a sense of urgency to reach an agreement, but analysts remain skeptical that an agreement will be reached. Traders can expect more volatility from crude prices ahead of the OPEC meeting on Wednesday.

Federal Reserve chair Janet Yellen will testify before a Congressional committee on Thursday, and her remarks could shed more light on the Fed’s plans regarding a rate hike. Last week, the Fed held interest rates at 0.25%. This was widely expected, but there was a surprise as three of the ten FOMC members dissented with the decision, preferring to raise rates immediately by a quarter-percentage point. This significant dissent within the FOMC underscores continuing divisiveness within the Fed, with one economist calling the Fed decision “one of the most decisive FOMC meetings in recent memory”. Recent comments from FOMC members regarding a rate hike have conflicted with each other, and the mixed messages have left the markets confused. The surprising level of dissent will do little to restore market confidence in the Fed, which back in December 2015 promised up to four rate hikes in 2016, but has yet to raise rates this year.

The Fed policy statement was generally upbeat and broadly hinted at a December rate hike. However, the markets can be forgiven for remaining somewhat skeptical, as the Fed has previously talked about a strong US economy and failed to follow up with a rate hike. Currently, a rate hike is priced in at 51 percent, but plenty can happen until the December policy meeting (the Fed is unlikely to make a move in November, just ahead of the US presidential election). The Fed has consistently stated that the next rate hike will be data-dependent, which means that stronger economic numbers, especially on the inflation front, will increase the likelihood of a December hike.

WTI/USD Fundamentals

Tuesday (September 27)

• 13:00 US S&P/CS Composite-20 HPI. Estimate 5.0%.Actual 5.0%
• 13:45 US Flash Services PMI. Estimate 51.1. Actual 51.9
• 14:00 US CB Consumer Confidence. Estimate 98.6. Actual 104.1 
• 14:00 US Richmond Manufacturing Index. Estimate minus -2. Actual minus -8
• 15:15 US FOMC Member Stanley Fischer Speaks

*Key events are in bold

*All release times are EDT

WTI/USD for Tuesday, September 27, 2016

WTI/USD September 27 at 10:25 EDT

Open: 45.70 High: 45.95 Low: 44.54 Close: 44.71

WTI USD Technical

• WTI/USD was flat in the Asian session. The pair posted sharp losses in the European session and the downward trend has continued in North American trade
• 43.45 is providing support
• There is resistance at 46.49

Further levels in both directions:

• Below: 43.45, 38.38 and 32.33
• Above: 46.69, 50.13, 53.50 and 59.69

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.