US Crude Higher on Strong US Employment Report

US crude has posted gains on Tuesday, reversing directions from the downward trend on Monday. Crude is trading at $44.32 per barrel in the North American session. Brent crude is trading at $44.96, as the Brent premium stands at $0.64. On the release front, US JOLT Job Openings jumped to 5.76 million, well above expectations. On Wednesday, the EIA will release its weekly crude inventory report, with an estimate of 0.50 million, compared to the last release of 2.8 million.

US crude has dropped about 3% on Monday, as there was positive news out of Alberta, scene of a huge wildfire which has disrupted oil production. The fire has forced the evacuation of 90,000 people from the town of Fort McMurray and forced the closure of oil sand facilities and reduced Canadian oil production by 1 million barrels. However, the fire has changed directions and moved away from oil production facilities. Earlier this week, Saudi Arabia fired its oil minister, Ali al-Naimi who served for 20 years in this capacity. This has created some uncertainty, as the move has raised concerns in the markets that the firing could lead to changes in the country’s oil policy.

Is the US labor market showing signs of fatigue? Recent employment numbers have been a mix, which has raised concerns about the economy. On Tuesday, JOLTS Jobs Openings surged to 5.76 million, crushing the estimate of 5.55 million. Last week, Nonfarm Payrolls looked awful, as the key indicator slid to just 160 thousand, well short of the forecast of 203 thousand. This marked the lowest reading in seven months. There was concern that NFP, one of the most important indicators, would post soft numbers after weak job numbers earlier this week. ADP Nonfarm Payrolls and Unemployment Claims both missed their estimates. In other releases on Friday, wage levels showed no change, as Average Hourly Earnings posted a weak gain of 0.3%. The unemployment rate remained steady at 5.0%.

With the Federal Reserve standing on the sidelines so far in 2016, the markets are looking for hints as to when the Fed might make a move. In its April policy statement, the Fed didn’t raise rates, but the message to the markets with regard to the US economy was one of cautious optimism. The statement noted continuing improvement in the labor market but added that it was keeping a watchful eye on low inflation levels. The Fed statement appeared to leave the open to a June hike, but last week’s soft payrolls report has greatly reduced the likelihood of a June move. On Friday, New York Fed president William Dudley said he remains confident that the Fed could raise rates as much as twice this year, but many analysts are skeptical if the Fed will raise rates before 2017. Economic releases, especially employment and inflation indicators, will be major factors as the Fed must decide whether to press the rate trigger in June.

WTI/USD Fundamentals

Tuesday (May 10)

• 3:15 US FOMC Member William Dudley Speaks
• 6:00 US NFIB Small Business Index. Estimate 93.2. Actual 93.6
• 10:00 US JOLTS Openings. Estimate 5.55M. Actual 5.76M
• 10:00 US Wholesale Inventories. Estimate 0.2%. Actual 0.1%

*Key events are in bold

*All release times are EDT

WTI/USD for Tuesday, May 10, 2016

WTI/USD May 10 at 11:15 EDT

Open: 43.28 Low: 43.03 High: 44.43 Close: 44.32

WTI/USD Technical

• WTI/USD has posted gains over the course of the Tuesday session
• 43.45 remains fluid and has switched to support following gains by WTI/USD earlier on Tuesday
• There is resistance at 46.69

Further levels in both directions:

• Below: 43.45, 40.00, 37.75 and 35.09
• Above: 46.69, 50.13 and 51.59

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