WTI/USD – US Crude Punches Past $50, Nonfarm Payrolls Next

US crude has posted slight gains on Thursday, pushing past the $50 level. In the North American session, WTI/USD futures are trading at $50.33 per barrel. Brent futures have risen to $52.38, as the Brent premium stands at $1.95. On the release front, unemployment claims were excellent, dropping to 249 thousand, below the estimate of 255 thousand. On Friday, the US will release three key employment indicators – nonfarm employment change, average hourly earnings and the unemployment rate.

It’s been an impressive run for US crude, which has recorded six consecutive winning (daily) sessions, surging an impressive 12.6 percent during this period. On Wednesday, crude oil inventories posted a decline of 3 million barrels, surprising the markets, which had predicted a surplus of 1.1 million. Crude stockpiles have posted declines in five straight releases and on each occasion, the markets have forecast a surplus. Oil prices have been buoyed by the surprise agreement by OPEC members to lower production levels, although an official agreement is not expected to be signed until November. Weak oil prices have put a major dent in the revenues of oil exporters, and a cap agreement could stabilize prices at $50-60 a barrel. However, OPEC members have blatantly cheated on their production quotas in the past, so it remains to be seen if countries like Iran will actually implement production cuts.

After a disappointing ADP payroll report, US unemployment claims sparkled, dropping to just 249 thousand last week. Unemployment claims have come in below the forecast for 10 straight weeks, pointing to a tight labor market. Jobless filings have been below 300,000 for 83 straight weeks, marking the longest streak since 1970. With a December rate hike up in the air, Friday’s triple-release of US job numbers will be especially important. The markets are expecting some improvement in the September numbers. Non-farm Employment Change is expected to improve to 171 thousand, while Average Hourly Earnings, which measures wage growth, is forecast to edge higher to 0.2%. The unemployment rate has held steady at 4.9% for three months and no change is expected. If the markets are correct and September shows stronger numbers, the US dollar could pick up some ground against the pound. If these releases are soft, however, the Fed might get cold feet and a rate hike could remain on hold until 2017.

WTI/USD Fundamentals

Thursday (October 6)

• 7:30 US Challenger Job Cuts. Actual -24.7%
• 8:30 US Unemployment Claims. Estimate 255K. Actual 249K
• 10:30 US Natural Gas Storage. Estimate 67B. Actual 80B

Upcoming Key Events 

Friday (October 7)

• 8:30 US Average Hourly Earnings. Estimate 0.2%
• 8:30 US Nonfarm Employment Change. Estimate 171K
• 8:30 US Unemployment Rate. Estimate 4.9%

*Key events are in bold

*All release times are EDT

WTI/USD for Thursday, October 6, 2016

WTI/USD October 6 at 12:00 EDT

Open: 49.70 High: 50.51 Low: 49.34 Close: 50.33

WTI USD Technical

• WTI/USD was flat in the Asian session. The pair has posted slight gains in the European and North American sessions
• 50.13 has switched to a support role following gains by WTI/USD in the Thursday session
• There is resistance at 53.50

Further levels in both directions:

• Below: 50.13, 46.69, 43.45 and 38.38
• Above: 53.50, 59.69 and 65.49

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