Crude Oil, WTI, US Dollar, US Debt Ceiling, Fed, FOMC, Canadian Fires, EIA – Talking Points
- Crude oil rejected a move to the upside on Friday despite a soft US Dollar
- US debt ceiling talks are set to continue this week with a resolution needed soon
- If the Fed is changing tack, will the US economy boom to boost WTI?
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Crude oil continues to consolidate at the start of the Monday after posting a small gain last week with the US debt ceiling lurching toward the so-called X-date.
Negotiations between US President Joe Biden and House Speaker Kevin McCarthy are due to resume on Monday. Mr McCarthy said that a productive phone call transpired between the two on Sunday.
A softer US Dollar appears to be more pronounced in currency pairs and the gold price over the last few sessions. Higher Treasury yields saw some support for the ‘big dollar’ with the benchmark 2-year bond nudging 4.35% on Friday after having traded at 3.66% earlier this month.
US Federal Reserve Chair Jerome Powell made remarks on Friday that were seen as potentially less hawkish than previous commentary. In regard to future policy decisions, he said, “the risks of doing too much versus doing too little, have become more balanced.”
Minneapolis Federal Reserve President Neel Kashkari also stated that he would be open to skipping a hike at the next Federal Open Market Committee (FOMC) meeting in mid-June.
The futures and swaps markets are pricing in almost a 50-basis point cut to the Fed funds target rate by the end of the year.
The Alberta, British Columbia and Saskatchewan provinces in Canada are experiencing severe wildfires and the nation’s oil production output is expected to be reduced as a result. Current estimates are for a reduction of almost 250k barrels per day.
The weekly US Energy Information Agency (EIA) data will be released on Wednesday, and it will be closely watched after last week’s surprise leap in oil inventory.
5.04 million barrels were added to stockpiles which were way above the detraction of 920k that had been anticipated.
Update crude oil prices can be found here.
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WTI CRUDE OIL TECHNICAL ANALYSIS
WTI failed to overcome resistance at 73.93 last Friday when it made a high at 73.58 and these levels may continue to offer resistance.
The 34- and 100-day Simple Moving Average (SMA) is just above these levels and may lend resistance.
On the downside, support might reside at the breakpoints and prior lows of 69.41, 66.82, 66.12, 64.36, 63.64 and 62.43.
Chart created in TradingView
— Written by Daniel McCarthy, Strategist for DailyFX.com
Please contact Daniel via @DanMcCarthyFX on Twitter
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