Crude Oil Slips to 6-Year Lows, US Jobs Report Up Next

US Crude continues to drop, as the pair, trades at $37.45 per barrel in Tuesday’s European session. Crude has dropped sharply in value since Friday, when the price stood at $41 per barrel. In the US, the key event is JOLTS Jobs Openings, with the markets expecting the indicator to improve to 5.59M. Earlier, the NFIB Small Business Index slipped to 94.8 points, short of expectations.

Oil prices continue to sag, as crude has now dropped to its lowest levels since February 2009. Oil lost ground late in the week and the slump has continued this week. Meanwhile, there was disappointment, but not a great deal of surprise as OPEC members failed to reach an agreement on production cutbacks at a meeting in Vienna on Friday. Oil producers have shown little 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 facilities, and many tankers cannot unload their cargo. The statement issued after the meeting was noticeable in that it failed to mention a production target, as previous OPEC meetings have at least stated a production target, even if historically OPEC members have cheated and produced above their quota. The lack of a production target points to deep discord amongst the OPEC nations, which means that production levels will remain at higher levels, and oil prices could continue to head south.

With a Federal Reserve rate hike widely expected next week, Friday’s Nonfarm Payrolls report took on added significance. The key indicator dropped to 211 thousand in November, much lower than the previous release of 271 thousand. Still, this was good enough to beat the estimate of 201 thousand. This indicator is often a market-mover, and the positive reading will lend support to Federal Reserve policymakers who are in favor of raising interest rates later this month. The Federal Reserve will obviously not confirm that a rate hike is imminent, but Fed chair Janet Yellen testified on Capitol Hill on Thursday, and signaled that a rate increase is likely in December, barring some unforeseen disastrous economic data before the rate decision on December 16. Last week, Yellen added that the Fed is satisfied with the progress shown by the US labor market and “looked forward” to a rate hike. Persistently low inflation levels have hampered the recovery and are well below the Fed target of 2 percent, and is a key reason why the Fed did not raise rates earlier this year. However, Yellen stated that she expects inflation numbers to improve, so weak inflation is unlikely to be an impediment to an historic rate hike, with Fed Funds futures pricing in a 79% chance of an increase.

US PMI reports, key gauges of economic activity, had a disappointing week. On Tuesday, ISM Manufacturing PMI slipped to 48.6 points in November. This figure fell short of the estimate of 50.6 points, and marked the first contraction of the index since May 2013. Recent manufacturing releases were also soft, as the US manufacturing sector continues to struggle. There wasn’t any relief from ISM Non-Manufacturing PMI on Thursday, as the index slipped to 55.9 points, well short of the forecast of 58.1 points. This marked a six-week low for the indicator. The silver lining is that although the index took a hit in November, the reading was still above the 50 line, indicative of expansion.

WTI/USD Fundamentals

Tuesday (Dec.8)

  • 11:00 US NFIB Small Business Index. Estimate 96.6 points. Actual 94.8 points
  • 15:00 US JOLTS Job Openings. Estimate 5.59M
  • 15:00 US IBD/TIPP Economic Optimism. Estimate 45.2 points

*Key releases are highlighted in bold

*All release times are GMT

WTI/USD for Tuesday, December 8, 2015

WTI/USD December 8 at 12:30 GMT

WTI/USD  37.45 H: 38.08 L: 37.63

WTI/USD Technical

S3 S2 S1 R1 R2 R3
30.00 33.22 35.09 37.75 39.87 42.59
  • Crude was flat in the Asian session and has posted slight losses in European trade.
  • 37.75 has switched to a resistance role as oil continues to lose ground.
  • 35.09 is providing support.

Further levels in both directions:

  • Below: 35.09, 33.22 and 30.00
  • Above: 37.75, 39.87, 42.59, and 44.30

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.