US Crude Struggling at $40 After Strong US Payrolls

US Crude prices dropped sharply on Wednesday, slipping below the symbolic level of $40 per barrel. Oil has steadied on Thursday, trading at $40.57 in the European session. In the US, today’s key events are Unemployment Claims and the ISM Non-Manufacturing PMI. As well, Federal Reserve Chair Janet Yellen testifies before the Joint Economic Committee.

With oil prices hovering close to their lowest levels since August, all eyes are on the OPEC meeting on Friday. Oil producers have not shown much inclination to reduce their market share and cut back production, resulting in a huge global glut of oil that has led to a serious shortage of land-storage facility as many tankers cannot unload their cargo. If this situation continues, oil prices could head southwards. There has been a report that Saudi Arabia, the largest OPEC member, will agree to cut production levels by 1 million barrels a day if non-OPEC members such as Iran follow suit. Such a move could provide a respite for weak oil prices, but it is doubtful if the oil producers, which have traditionally squabbled about production levels, will be able to reach an agreement to cut supplies in an attempt to raise prices.

In the US, this week’s employment numbers kicked off in style, with a strong surge from ADP Nonfarm Payrolls. The key indicator climbed to 217 thousand, easily beating the estimate of 191 thousand. This marked a sharp rebound from the previous release of 182 thousand. On Thursday, we’ll get a look at Unemployment Claims, with the markets expecting the indicator to rise to 269 thousand. The employment event parade concludes on Friday, with the official Nonfarm Payrolls report. The markets are braced for a strong downturn, with an estimate of 201 thousand. 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 volatility on the currency markets.

WTI/USD Fundamentals

Thursday (Dec. 3)

  • 12:30 US Challenger Job Cuts
  • 13:30 US Unemployment Claims. Estimate 269K
  • 14:45 US Final Services PMI. Estimate 56.5 points
  • 15:00 Fed Chair Janet Yellen Testifies
  • 15:00 US ISM Non-Manufacturing PMI. Estimate 58.1 points
  • 15:00 US Factory Orders. Estimate 1.2% 
  • 15:30 US Natural Gas Storage. Estimate -22B
  • 18:10 US FOMC Member Stanley Fischer Speaks

Upcoming Key Events

Friday (Dec. 4)

  • 13:30 US Average Hourly Earnings. Estimate 0.2%
  • 13:30 US Nonfarm Employment Change. Estimate 201K
  • 13:30 US Unemployment Rate. Estimate 5.0%

*Key releases are highlighted in bold

*All release times are GMT

WTI/USD for Thursday, December 3, 2015

WTI/USD December 3 at 12:45 GMT

WTI/USD 40.57 H: 40.76 L: 40.07

WTI/USD Technical

S3 S2 S1 R1 R2 R3
35.09 37.75 39.87 42.59 44.30 47.04
  • 39.87 is a weak support line and could be tested during the day.
  • 42.59 has strengthened in resistance as the pair trades at lower levels.

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.