Crude Oil Edges Higher, US Unemployment Claims Disappoints

US Crude has reversed directions on Thursday, rising to $29.18 a barrel in the North American session. In economic news, Unemployment Claims jumped to an 11-month high. The Philly Fed Manufacturing Index also declined to -3.5 points, but beat the estimate. Crude Oil Inventories jumped to 4.0 million last week, beating the forecast of 3.3 million.

It was another bad day for US releases. Following weak CPI reports on Wednesday, employment numbers missed expectations on Thursday. Unemployment Claims jumped to 293 thousand, close to the symbolic 300-thousand level, and much higher than the estimate of 279 thousand. This was the key indicator’s highest level since February 2015, and will likely dampen enthusiasm for a rate hike in March. Federal Reserve members have also expressed concern about weak inflation levels, and weak CPI numbers for December will not help the case to raise rates for a second time, following the historic rate hike in December. The Fed will hold its monthly policy meeting next week, and although the Fed statement may provide some clues about future monetary policy, it’s very unlikely that the Fed will raise rates at the January meeting.

Is crude oil in free-fall? January has been disastrous for crude oil prices, which have plunged a remarkable 22% and is languishing at levels not seen since February 2004. There don’t appear to be any lifelines on deck for the plummeting commodity. In a development which could exacerbate the global oil slump, Iran has been given the green light to resume oil exports. Western nations, led by the US, have officially lifted sanctions on Iran, after the International Atomic Energy Agency announced that Iran had fully complied with its obligations under the nuclear agreement. Iran is expected to immediately begin exporting up to 600,000 barrels/day, adding to the huge glut of oil on global markets. With OPEC unable to lower production ceilings and the US shale oil industry booming, oil prices could continue to head lower.

WTI/USD Fundamentals

Thursday (Jan. 21)

• 8:30 US Philly Fed Manufacturing Index. Estimate -5.8 points. Actual -3.5 points
• 8:30 US Unemployment Claims. Estimate 279K. Actual 293K
• 10:30 US Natural Gas Storage. Estimate -180B. Actual 178B
• 11:00 US Crude Oil Inventories. Estimate 3.3M. Actual 4.0M

*Key releases are highlighted in bold

*All release times are EST

WTI/USD for Thursday, January 21, 2016

WTI/USD January 21 at 11:40 GMT

Open: 29.57 Low: 28.36 High: 29.57 Close: 29.35

WTI/USD Technical

• WTI/USD was uneventful in the Asian and European sessions. The pair has posted gains in North American trade.
• There is resistance at the round number of 30.00
• 26.64 is providing support

Further levels in both directions:

• Below: 26.64, 22.88 and 20.00
• Above: 30.00, 32.22 and 35.09

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