Crude Oil Slips on Brazil Worries

WTI crude is little changed on Wednesday, trading at $45.85 a barrel in the European session.  In the US, there are three key releases – ADP Nonfarm Payrolls, Trade Balance and ISM Non-Manufacturing PMI. On Thursday, we’ll get an additional look at employment data, with the release of Unemployment Claims.

Oil prices hit 3-week highs on Tuesday, as concerns about a drop in Brazil production pushed prices higher. One US refining company suspended operations following a flood in Brazil, and a strike by Petrobas, Brazil’s state-owned oil producer, has affected about 13% of the company’s daily production. Brazil is a major oil producer, so a prolonged disruption of oil production could push prices higher.

Meanwhile, concerns about a global supply glut continue to spook the markets. Weaker demand from China, the world’s second largest oil consumer, coupled with high Russian production has kept oil prices low. As well, OPEC members have not cut production levels, despite persistently oversupply and low prices. At the same time, oil could move higher if the markets feel that the Federal Reserve will take action and raise interest rates in December. This was underscored last week, as the hawkish Fed policy statement resulted in oil prices surging 6 percent.

With the Federal Reserve statement behind us, there was much anticipation ahead of the US Advance GDP for the third quarter, which was released last week. As it turned out, this key event didn’t shake up the markets, as the reading of a 1.5% gain was almost identical to the forecast of 1.6%. Still, this figure was much lower than the Q2 Final GDP of 3.9%, pointing to a slowdown in the US economy. Meanwhile, Unemployment Claims beat the estimate for a fourth straight week, coming in at 260 thousand. The estimate stood at 264 thousand. Will the upcoming ADP Nonfarm Payrolls also beat the forecast? The markets are bracing for a reading of 183 thousand, much lower than last month’s figure of 200 thousand.

WTI/USD Fundamentals

Wednesday (Nov. 4)

• 10:30 FOMC Member Lael Brainard Speaks
• 13:15 US ADP Nonfarm Employment Change. Estimate 183K
• 13:30 US Trade Balance. Estimate -42.7B
• 14:45 US Final Services PMI. Estimate 54.6 points
• 15:00 Federal Reserve Chair Janet Yellen Testifies
• 15:00 ISM Non-Manufacturing PMI. Estimate 56.6 points
• 15:30 US Crude Oil Inventories. Estimate 2.5M
• 19:30 FOMC Member William Dudley Speaks

Upcoming Key Events

Thursday (Nov. 5)

• 13:30 US Unemployment Claims. Estimate 263K

*Key releases are highlighted in bold

*All release times are GMT

WTI/USD for Wednesday, November 4, 2015

WTI/USD November 4 at 12:40 GMT

WTI/USD 48.13 H: 48.22 L: 47.44

XAU/USD Technical

• WTI/USD has shown marginal movement in the Asian and European sessions.
• 47.04 has switched to a support role.
• 49.06 is an immediate resistance line.

Further levels in both directions:

• Below: 47.04, 44.30, 42.59 and 39.87
• Above: 49.06, 53.86 and 55.35

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