WTI/USD – US Crude Slide Continues as US Jobs Report Disappoints

US crude continues to lose ground this week. In Tuesday’s North American session, US crude futures are trading at $51.49. Brent crude futures are trading at $54.38, as the Brent premium stands at $2.89. On the release front, JOLTS Jobs Openings edged lower to 5.52 million, shy of the estimate of 5.59 million. On Wednesday, the US releases Crude Oil Inventories, with an estimate of 0.9 million barrels.

Crude prices dropped 3.7 percent on Monday, on reports of an increase in the number of oil rigs operating in the US. This increase in production has offset lower production from OPEC and other producers, under an agreement which commenced on January 1. US Crude continued to fall on Tuesday and reached a low of $51.16, its lowest level since December 16. Oil prices could remain volatile as the markets monitor production levels and try to determine if the huge global oversupply of crude is in fact getting smaller due to the recent oil exporters agreement.

The US released key employment numbers on Friday, and the markets responded with a thumbs-up, which boosted the US dollar. Wages rebounded in December, as Average Hourly Earnings climbed 0.4%, edging above the estimate of 0.3%. This marked a strong turnaround after the November reading of -0.1%. The news was not as bright from Nonfarm Payrolls, which dropped to 156 thousand, well off the estimate of 175 thousand. This marked a 3-month low, but the dollar still posted gains. The unemployment rate edged up to 4.7%, matching the forecast.

Last week’s Federal Reserve minutes were cautious in tone. The market reaction was lukewarm, sending the US dollar broadly lower. In the minutes, Fed policymakers essentially said that monetary policy in the coming months will be dictated in large part by the economic platform of the incoming Trump administration, a platform which remains unclear. FOMC members expressed concern about higher inflation levels, given the “prospects for more expansionary fiscal policies in the coming years”. This is a clear reference to president-elect Trump’s plans to increase fiscal spending and cut taxes, which would likely result in higher inflation, something the US hasn’t had to deal with in years. Still, policymakers haven’t changed their view that gradual rate hikes remains an appropriate monetary policy. Many analysts are predicting another rate hike in June, but this forecast could easily change, depending on the performance of the US economy in the first half of 2017.

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WTI/USD Fundamentals

Tuesday (January 9)

• 6:00 NFIB Small Business Index. Estimate 99.6. Actual 105.8
• 10:00 JOLTS Job Openings. Estimate 5.59M. Actual 5.52M
• 10:00 Final Wholesale Inventories. Estimate 0.9%. Actual 0.2%

Wednesday (January 11)

• 10:30 Crude Oil Inventories. Estimate 0.9M

*All release times are EST

* Key events are in bold

WTI/USD for Tuesday, January 10, 2017

WTI/USD January 10 at 12:00 EST

Open: 53.23 High: 54.11 Low: 53.05 Close: 52.95

WTI USD Technical

• WTI/USD was flat in the Asian session. The pair has posted considerable losses in the European and North American sessions
• 52.22 is a weak support level
• 58.32 is the next resistance line

Further levels in both directions:

• Below: 52.22, 46.54, 40.57 and 33.22
• Above: 58.32, 65.05 and 72.99

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