US Crude Under Pressure, Jobless Claims Jump

US crude futures have posted small gains on Thursday, trading at $38.88 per barrel in the North American session. Brent crude futures are trading at $40.60, as the Brent premium has risen to $1.72. In economic news, Unemployment Claims rose to 276 thousand, higher than the forecast of 266 thousand. Chicago PMI improved to 53.6 points, easily beating the estimate of 50.5 points.

Is US crude in trouble? The commodity has posted losses over six straight days, and has dropped 8 percent since mid-March, when crude was trading above $42. Oil prices remain under pressure due to a huge oversupply, and the weekly EIA Inventory report of US crude has shown only one decline in 2016. Oil producers will meet in Qatar next month to discuss capping output, but it’s questionable if this meeting will be any more successful than previous attempts which led nowhere. Many OPEC nations have announced that they will not be attending, and crude output from OPEC rose in March.

Janet Yellen surprised the markets with an ultra-dovish speech in New York. Yellen served notice that the Fed would continue its cautious approach towards monetary tightening, given the collapse of oil prices and risks due to the Chinese slowdown. Prior to the speech, several Fed officials had called for a raise in interest rates as early as April, but the Fed chair poured cold water on any rate hike enthusiasm with her remarks. Yellen gave notice that the Fed would maintain its cautious approach towards monetary tightening, given the risks to the US economy from turbulent global conditions and weakness in China. Yellen downplayed higher inflation levels, which in January reached 1.7 percent, the highest in almost two years. This reading is not far from the Fed’s target of 2.0 percent and some Fed members have gone on record saying that the Fed should raise rates before inflation pushes above the 2.0 percent threshold. Will Yellen’s cautious assessment be reinforced or challenged by her Fed colleagues? New York Fed president William Dudley will address a meeting in Lexington, Virginia on Thursday, and the markets will be looking for Dudley’s take on Yellen’s comments.

With the Fed sending the markets mixed messages about the timing of a rate hike, this week’s employment numbers, highlighted by Nonfarm Payrolls, are under the market microscope. On Thursday, Unemployment Claims rose last week by 276 thousand, considerably higher than the estimate of 266 thousand. This followed a solid ADP Nonfarm Employment Change report, which came in at 200 thousand, above the estimate of 195 thousand. The week wraps up with the official Nonfarm Payrolls on Friday. The forecast stands at 206 thousand. If the indicator stays within expectations, we could see the US dollar gain ground against crude.

WTI/USD Fundamentals

Thursday (March 31)

• 7:30 US Challenger Job Cuts. Actual 31.7%
• 8:30 US Unemployment Claims. Estimate 266K. Actual 276K
• 9:45 US Chicago PMI. Estimate 50.5. Actual 53.6
• 10:30 US Natural Gas Storage. Estimate -20B
• 17:00 US FOMC Member William Dudley Speaks

Upcoming Key Events

Friday (April 1)

• 8:30 US Average Hourly Earnings. Estimate 0.2%.
• 8:30 US Nonfarm Employment Change. Estimate 206K
• 8:30 US Unemployment Rate. Estimate 4.9% 

WTI/USD for Thursday, March 31, 2016

WTI/USD March 31 at 11:10 DST

Open: 38.32 Low: 37.58 High: 39.05 Close: 38.88

WTI/USD Technical

• WTI/USD lost ground in the Asian session. The pair reversed directions and posted gains in the European session. The upward movement has continued in North American trade.
• 37.75 was tested earlier in support and could see further action in the North American session
• There is resistance at 40.00

Further levels in both directions:

• Below: 37.75, 35.09 and 32.22
• Above: 40.00, 43.45, 46.69 and 50.89

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