Crude Steady Ahead Of U.S. Manufacturing PMI
MarketPulse | Dec 01, 2015 06:01AM ET
US crude continues to have an uneventful week, as crude trades just shy of $42 a barrel in Tuesday’s European session. In economic news, we’ll get a look at manufacturing data, highlighted by ISM Manufacturing PMI. The markets are expecting a forecast of 50.6 points.
November was a brutal month for oil prices, which plunged some 12 percent. With China and other emerging countries struggling with an economic slowdown, oil supplies continue to far outstrip global demand. Oil is floundering at $42 per barrel, its lowest level since August. The continuing glut has increased pressure on producers to scale back production, but this hasn’t occurred, despite the predictable plunge in oil prices. Saudi Arabia and other OPEC members appear determined to maintain current production level, so as not to lose their market share. If this situation continues, we could see oil drop below $30 a barrel as early as next year. With this background, the markets will be keeping a close eye on the OPEC meeting on Friday. If, as expected, OPEC members don’t take any concrete action, we could see oil prices drop towards the symbolic $40 level.
US manufacturing numbers have looked weak in recent readings, indicative of continuing weakness in the manufacturing sector. The Empire State Manufacturing Index posted a dismal reading of -10.7 points, worse than the estimate of -5.3 points. This marked a fourth straight decline by the important indicator. The Philly Fed Manufacturing Index posted a weak gain of 1.9 points. If the ISM Manufacturing PMI, a key event, falls short of expectations, the US dollar could lose ground.
With the US economy generally producing strong data, speculation has increased that the Federal Reserve will change course and raise interest rates for the first time in ten years. Unemployment Claims were down sharply last week, and even a lukewarm Nonfarm Payroll report late in the week is unlikely to present an obstacle for the Fed. At the same time, there is a serious concern over low inflation levels, as the Fed has noted in the past that inflation is an important factor in the rate decision process. We’ll get a look at one more round of CPI and PPI reports prior to the Fed policy meeting on December 16, and these releases could cause some volatility in the markets if they are not close to the estimates. Meanwhile, the guessing game continues, and the markets will be closely following every key release and comments from Fed members in the two weeks leading up to the critical December policy meeting.
WTI/USD Fundamentals
Tuesday (Dec. 1)
- 14:45 US Final Manufacturing PMI. Estimate 52.6 points
- 15:00 US ISM Manufacturing PMI. Estimate 50.6 points
- 15:00 US Construction Spending. Estimate 0.5%
- 15:00 US ISM Manufacturing Prices. Estimate 40.0 points
- All Day – Total Vehicles Sales. Estimate 18.0M
- 16:45 US FOMC Member Charles Evans Speaks
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Upcoming Key Events
Wednesday (Dec. 2)
- 13:15 ADP Nonfarm Employment Change. Estimate 191K
- 17:25 Fed Chair Janet Yellen Speaks
*Key releases are highlighted in bold
*All release times are GMT
WTI/USD for Tuesday, December 1, 2015
WTI/USD December 1 at 10:00 GMT
WTI/USD 41.83 H: 42.17 L: 41.65
XAU/USD Technical
| S3 | S2 | S1 | R1 | R2 | R3 |
| 35.09 | 37.75 | 39.87 | 42.59 | 44.30 | 47.04 |
- 39.87 is providing strong support.
- 42.59 is a resistance line.
Further levels in both directions:
- Below: 39.87, 37.75 and 35.09
- Above: 42.59, 44.30, 47.04 and 49.06
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