US Crude Struggling at Key $30 Level

US crude is steady on Tuesday, as March futures trade at the $30 level in the European session. Brent crude futures are currently trading at $33.36. Today’s key event is US JOLTS Job Openings, with the markets expecting a reading of 5.43 million, which would be a slight drop from the previous release. On Wednesday, Fed Chair Janet Yellen will testify before the House Financial Services Committee in Washington. With the markets looking for clues regarding the timing of another rate hike, this event will be closely monitored by the markets.

The US economy appears to have softened, as last week’s employment and service sector numbers all missed expectations. ISM Non-Manufacturing PMI, dropped to 53.2 points in January, its worst showing since March 2014. Unemployment claims rose unexpectedly to 285 thousand, and the week wrapped up with a dismal Nonfarm Payrolls report, with a small gain of 151 thousand. The markets had expected a much stronger gain of 189 thousand. No less worrying, this figure marked a sharp drop from the previous reading of 292 thousand. The soft labor data continued on Monday, as the Labor Market Conditions Index posted an unimpressive reading of 0.4 points, marking a four-month low.

Crude oil prices jumped in mid-week, bolstered by the dollar sell-off after weak US numbers. However, crude was unable to maintain these gains, and has slipped back to the psychologically important level of $30. The huge oil glut is unlikely to improve anytime soon, as underscored by the most recent US Crude Oil Inventories report, which showed a surplus of 7.8 million, much higher than the estimate of 3.7 million. This was the second straight week that oil supplies were much higher than expected, and these readings will only increase worries that demand for oil products has weakened. The Chinese slowdown has pushed oil prices sharply lower, as the Asian giant is world’s second largest consumer of oil. Low oil prices continue to contribute to weak inflation levels around the world, and inflation in the US remains well short of the Federal Reserve’s target of 2.0%. With the US posting soft inflation and employment readings, another rate hike could have to wait until mid-2016.

WTI/USD Fundamentals

Tuesday (Feb. 9)

• 6:00 US NFIB Small Business Index. Estimate 94.6 points. Actual 93.9 points
• 10:00 US JOLTS Job Openings. Estimate 5.41M
• 10:00 US Wholesale Inventories. Estimate -0.1%

Upcoming Key Events

Wednesday (Feb. 10)

• 15:00 Fed Chair Janet Yellen Testifies

*All release times are EST

WTI/USD for Tuesday, February 9, 2016

WTI/USD February 9 at 6:25 EST

Open: 29.69 Low: 29.60 High: 30.60 Close: 30.35

WTI/USD Technical

• The pair continues to trade close to the round number of 30.00. It is currently providing weak support and remains under pressure.
• There is resistance at 32.22

Further levels in both directions:

• Below: 30.00, 26.64 and 22.88
• Above: 32.22, 35.09, 37.75 and 39.87

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