US Crude Steady, Markets Eye Nonfarm Payrolls

US crude futures have posted slight gains on Thursday, trading at $34.88 a barrel in the North American session. Brent crude futures are trading at $36.93. In economic news, US Unemployment Claims climbed for a second straight week, with a reading of 278 thousand. The ISM Non-Manufacturing PMI was almost unchanged, with a respectable reading of 53.4 points. This beat the forecast of 53.2 points.

Crude oil prices are above $35 and are close to two-month highs. This is largely due to market sentiment that the crash in prices may have “bottomed out”, as crude has been climbing steady over the past three weeks. However, the huge surplus of crude continues to dwarf demand and may be with us for quite some time, which would weigh on the commodity. Perhaps underscoring this point, Crude Oil Inventories surged last week to 10.4 million, the largest surplus recorded in almost one year. Global demand for oil has decreased in recent months, sparked by the Chinese slowdown. The US economy has also softened, resulting in less demand for oil and exacerbating the tremendous collapse in oil prices.

US job reports are closely monitored by the markets, and a robust labor market in 2015 was a key reason that the Federal Reserve opted to raise rates in December. This year’s employment numbers have been mixed, and this has also been the trend so far this week. Unemployment Claims rose for a second straight week, rising to 278 thousand. Earlier in the week, ADP Nonfarm Payrolls improved to 214 thousand, crushing the estimate of 185 thousand. Will we see a repeat in the official Nonfarm Payrolls on Friday? A strong NFP release could revive speculation about a March rate hike by the Federal Reserve, although this scenario remains very unlikely. Meanwhile, there has been some improvement in the manufacturing sector, which has persistently posted poor numbers. Last week, durable goods reports sparkled, easily beating expectations. This was followed by ISM Manufacturing PMI, which improved to 49.5 points in January. Although this reading indicates slight contraction, it beat expectations and marked a four-month high. These readings have revived hopes that the worst is behind the manufacturing sector and that 2016 will bring better news to the beleaguered industry.

WTI/USD Fundamentals

Thursday (March 3)

• 7:30 US Challenger Job Cuts. Actual 21.8%
• 8:30 US Unemployment Claims. Estimate 271K. Actual 278K
• 8:30 US Revised Nonfarm Productivity. Estimate -3.2%. Actual -2.2%
• 8:30 US Revised Unit Labor Costs. Estimate 4.8%. Actual 3.3%
• 9:45 US Final Services PMI. Estimate 49.8. Actual 49.7
• 10:00 US ISM Non-Manufacturing PMI. Estimate 53.2. Actual 53.4
• 10:30 US Factory Orders. Estimate 2.1%. Actual 1.6%
• 10:30 US Natural Gas Storage. Estimate -49B. Actual -48B

Friday (March 4)

• 8:30 US Average Hourly Earnings. Estimate 0.2%
• 8:30 US Nonfarm Employment Change. Estimate 195K
• 8:30 US Unemployment Rate. Estimate 4.9%
• 8:30 US Trade Balance. Estimate -43.5B

*Key events are in bold

*All release times are EST

WTI/USD for Thursday, March 3, 2016

WTI/USD March 3 at 11:40 EST

Open: 34.63 Low: 34.20 High: 35.29 Close: 34.88

WTI/USD Technical

• WTI/USD was flat in the Asian and European sessions. The pair has posted slight gains in North American trade.
• 35.09 is a weak resistance line and was tested earlier. Will this line break in the North American session
• 32.22 is providing support

Further levels in both directions:

• Below: 32.22, 30.00, 26.64 and 22.88
• Above: 35.09, 37.75 and 40.00

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.