WTI/USD – US Crude Unchanged as US Posts Mixed Numbers

US crude prices are showing little movement on Thursday. In North American trade, WTI/USD futures are trading at $45.75. Brent crude futures are trading at $46.82, as the Brent premium stands at $1.07. On the release front, there were a host of key events and the readings were mixed. CPI matched expectations at 0.4%, but Core CPI came in at 0.1% shy of the estimate of 0.2%. Unemployment Claims sparkled at 235 thousand, much lower than the estimate of 257 thousand. This was the lowest weekly level since 1973, as the labor market remains very tight.

The Philly Fed Manufacturing Index dropped to 7.6 points, short of the forecast. On the housing front, Housing Starts remained unchanged at 1.23 million, above expectations. Later in the day, Fed chair Janet Yellen will testify about the economy before the Congressional Joint Economic Committee. With the Fed widely expected to raise interest rates next month, Yellen’s remarks will be closely watched in the markets.

U.S. Consumer Prices Post Largest Gain in 6 Months

US Crude Inventories posted another sharp surplus last week, confounding market predictions which continue to underestimate the indicator. The indicator jumped 5.3 million, crushing the estimate of 0.4 million. Still, US crude has held its own against the dollar despite the high surplus. Meanwhile, OPEC members are trying to drum up support for a cap agreement to stabilize oil prices. Although there is skepticism that the cartel will reach an agreement, Qatar, Algeria and Venezuela are working behind the scenes to reach a consensus. OPEC members will meet in Vienna in November 30. If the cartel fails to reach an agreement, analysts predict that oil prices could fall as low as $35 a barrel. On Friday, OPEC said its output hit a record 33.64 million barrels per day in October.

As the after-shocks of the US election begin to subside, what can we expect to see in the currency markets? Currently, market sentiment appears very favorable towards the dollar, which is on a roll against most major currencies. A Trump presidency, bolstered by a Republican-controlled Congress) could signal a looser fiscal policy and significant tax cuts. If this scenario materializes, inflation would likely climb, leading to higher interest rates and hence a stronger dollar. At the same time, Trump remains an enigma – aside from being “pro-business”, his political and economic agendas are unclear. This lack of certainty means the markets could be in for plenty of surprises with Trump in office, which could translate into volatility in the currency and commodity markets.

With the Federal Reserve meeting for a policy meeting in December, expectations are sky-high that the Fed will press the trigger and raise rates by a quarter-point for the first time in a year. There have been several false starts before, but this time should be different. The Fed has sent out strong signals that it will raise rates, and in the past two rate decisions, some FOMC members voted for an immediate rate hike. The odds of a rate rise currently stand at a remarkable 90 percent, so barring some sharp negative data out of the US, we’ll see a rate hike before the end of 2016.

Yellen Testimony and Inflation Data Eyed

WTI/USD Fundamentals

Thursday (November 17)

• 8:30 US Building Permits. Estimate 1.19M. Actual 1.23M
• 8:30 US CPI. Estimate 0.4%. Actual 0.4%
• 8:30 US Core CPI. Estimate 0.2%. Actual 0.1%
• 8:30 US Philly Fed Manufacturing Index. Estimate 8.1 points. Actual 7.6 points
• 8:30 US Unemployment Claims. Estimate 257K. Actual 235K
• 8:30 US Housing Starts. Estimate 1.16M Actual 1.32M 
• 8:50 US FOMC Member William Dudley Speech
• 10:00 US Fed Chair Janet Yellen Testifies
• 10:30 US Natural Gas Storage. Estimate 34B
• 12:30 US FOMC Member Lael Brainard Speech

*Key events are in bold

WTI/USD for Thursday, November 17, 2016

WTI/USD November 17 at 11:45 EST

Open: 45.46 High: 46.57 Low: 45.30 Close: 45.75

WTI USD Technical

• WTI/USD was flat in the Asian session. The pair posted considerable gains in European trade but has retracted and given up most of these gains in the North American session
• 40.57 is providing support
• 46.54 remains a weak resistance line

Further levels in both directions:

• Below: 40.57, 33.22 and 28.71
• Above: 46.54, 52.22 and 58.32

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