Crude Flat Ahead of US Jobs Report

US Crude remains listless this week, as crude trades at $41.36 a barrel in Wednesday’s European session. In the US, it’s a busy day on the event front, highlighted by ADP Nonfarm Employment Change. As well, Fed chair Janet Yellen makes a couple of appearances in Washington.

November was a brutal month for oil prices, which plunged some 12 percent. With China and other emerging countries struggling with an economic slowdown, oil supplies continue to far outstrip global demand. Oil remains close to its lowest levels since August. The continuing glut has increased pressure on producers to scale back production, but this hasn’t occurred, despite the predictable plunge in oil prices. Saudi Arabia and other OPEC members appear determined to maintain current production level, so as not to lose their market share. If this situation continues, we could see oil drop below $30 a barrel as early as next year. With this background, the markets will be keeping a close eye on the OPEC meeting on Friday. If, as expected, OPEC members don’t take any concrete action, we could see oil prices drop towards the symbolic $40 level. Meanwhile, US crude inventories have risen for nine straight weeks, and this trend is expected to continue when the US releases crude oil inventories later on Wednesday.

In the US, this week’s employment numbers kick off with the ADP Nonfarm Payrolls. The markets are expecting the ADP release to improve to 191 thousand. On Thursday, we’ll get a look at Unemployment Claims, followed by the official NFP on Friday. With the markets abuzz over continuing speculation about a rate hike later in the month, these employment releases will be under the market microscope and could result in strong volatility on the currency markets.

US manufacturing data has been anything but impressive in recent readings, and this was underlined by a soft reading from ISM Manufacturing PMI on Tuesday. The key index slipped to 48.6 points in November. This figure fell short of the estimate of 50.6 points, and marked the first contraction from the index since May 2013. Manufacturing data in October was also soft – the Empire State Manufacturing Index posted a dismal reading of -10.7 points, worse than the estimate of -5.3 points. This marked a fourth straight decline by the important indicator. As well, Philly Fed Manufacturing Index posted a weak gain of 1.9 points. This negative trend points to trouble in the manufacturing sector and could weigh on the US dollar.

WTI/USD Fundamentals

Wednesday (Dec. 2)

  • 1:00 US FOMC Member Lael Brainard Speaks
  • 13:10 US FOMC Member Dennis Lockhart Speaks
  • 13:15 ADP Nonfarm Employment Change. Estimate 191K
  • 13:30 US Fed Chair Janet Yellen Speaks
  • 13:30 US Revised Nonfarm Productivity. Estimate 2.2%
  • 13:30 US Revised Unit Labor Costs. Estimate 1.1%
  • 15:30 US Crude Oil Inventories. Estimate -0.6M
  • 17:25 US Fed Chair Janet Yellen Speaks
  • 19:00 US Beige Book
  • 20:40 US FOMC Member John Williams Speaks

Upcoming Key Events

Thursday (Dec. 3)

  • 13:30 US Unemployment Claims. Estimate 269K
  • 15:00 US Fed Chair Janet Yellen Testifies
  • 15:00 ISM Non-Manufacturing PMI. Estimate 58.1 points

*Key releases are highlighted in bold

*All release times are GMT

WTI/USD for Wednesday, December 2, 2015

WTI/USD December 2 at 12:35 GMT

WTI/USD 41.36 H: 41.85 L: 41.30

WTI/USD Technical

S3 S2 S1 R1 R2 R3
35.09 37.75 39.87 42.59 44.30 47.04
  • 39.87 is providing strong support.
  • 42.59 is the first line resistance line.

Further levels in both directions:

  • Below: 39.87, 37.75 and 35.09
  • Above: 42.59, 44.30, 47.04 and 49.06

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.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.