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Crude Oil Price Analysis for March 21, 2018

By:
David Becker
Published: Mar 20, 2018, 19:51 UTC

Crude traded higher topping at 2-week highs of 63.81. The contract has been bid-up ahead of today's meeting between Saudi crown prince bin Salman and

Crude Oil

Crude traded higher topping at 2-week highs of 63.81. The contract has been bid-up ahead of today’s meeting between Saudi crown prince bin Salman and president Trump at the White House. Saudi/Iran tensions have been talked up lately, with the Saudi foreign minister on Monday saying the Iran nuclear deal is “flawed”. This comes as uncertainty remains whether or not the U.S. will re-certify the agreement later this year.

Technicals

Crude oil prices broke out above trend line resistance rising more than 2.1%, and poised to test resistance near the February 26 highs at 64.24. Support is seen near former resistance at 62 and then the 10-day moving average at 61.54. Momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal as the MACD index (the 12-day moving average minus the 26-day moving average) crosses above the (MACD signal line – 9-day moving average of the MACD line).

RBA minutes to the 6th March policy meeting produced mixed signals

RBA minutes to the 6th March policy meeting produced mixed signals, with improving global conditions noted, which has buoyed commodity prices, but the central bank maintained that Australia’s terms of trade were expected to decline over the following several years, though remaining at an overall high level. The RBA also stuck to its recent script in noting that while domestic economic conditions have continued to improve, but that this has “not yet translated into a definitive pick-up in wages growth, which remains low.” The RBA highlighted its concern about high household debt levels. It also repeated that while the Australian trade-weighted value of the currency has remained within its range of the previous two years, but a rising currency would slow economic recovery and dampen inflationary pressures

White House denied Trump moving to sack Mueller

White House denied Trump moving to sack Mueller: a spokesman earlier said that Trump is not moving to fire U.S. Special Counsel Mueller, but the tweets reflect Trump’s “well-established frustration” over the Russian investigation. Trump on Sunday vented in a tweet: “Why does the Mueller team have 13 hardened Democrats, some big Crooked Hillary supporters, and Zero Republicans? Another Dem recently added…does anyone think this is fair? And yet, there is NO COLLUSION!” It’s not clear the markets will get much relief from this denial.

FOMC Forecast revisions, to be released Wednesday in conjunction with the FOMC statement, should reveal big boosts in the 2017 GDP estimates, alongside modest upward tweaks in the 2018 PCE chain price estimates and small trimmings in the jobless rate estimates across the forecast horizon. For GDP, the Fed’s December estimates incorporated the CBO scoring of the Senate tax bill, but not the more aggressive CBO scoring of the final tax law, and the Fed has yet to incorporate growth boosts from the February budget bill. GDP growth boosts of 0.2%-0.3% through 2019, and smaller boosts in 2020. The jobless rate estimates could be reduced by 0.1% across the board, given a stronger growth path for payrolls. The market is focused on the dot-plot, but we think that policymakers will refrain from committing to a steeper tightening path, leaving only tiny upward tweaks in a few rate forecasts.

Canada wholesale shipments rose

Canada wholesale shipments rose 0.1% in January after the revised 0.2% dip in December. Sales gains were evident in four of seven subsectors. A 3.1% gain in the food, beverage and tobacco subsector was the stand-out in January, with the increase the largest one month move higher since May of 2016. Machinery and equipment sales grew 1.6%, while personal and household goods improved 0.8%. Total sales volumes grew 0.5%, supportive of our projection for a 0.1% increase in January GDP. This was an encouraging report, as the rise in sales volumes contrasts with the 1.1% contraction in manufacturing shipment volumes during January.

About the Author

David Becker focuses his attention on various consulting and portfolio management activities at Fortuity LLC, where he currently provides oversight for a multimillion-dollar portfolio consisting of commodities, debt, equities, real estate, and more.

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