Struggling Crude Oil Barely Treading Above $30

US Crude continues to lose ground on Tuesday. In the North American session, futures for February delivery are trading at $30.80 a barrel in the North American session. There was more good news on the US employment front, as JOLTS Job Openings improved to 5.43 million, beating the forecast.

Crude oil remains mired in a steep slide, and has recorded daily losses for six straight sessions. The commodity is struggling at lows not seen since December 2003, and is dangerously close to the psychologically-important $30 level. Crude has been hammered by the slowdown in China, the world’s largest consumer of oil after the US. The New Year has started on ominous note, with the meltdown in the Chinese stock market and devaluation of the yuan exacerbating crude oil’s woes. Will the spiral continue? Experts such as Citigroup’s Ed Morse has stated that the plunge could continue, adding that US oil prices could drop as low as $20 a barrel. Adding to crude oil’s woes is the sharp rise of the US dollar against rival currencies. In a report published on Monday, Stanley Morgan stated that a 5 percent increase in the value of the dollar against a basket of currencies could push the price of oil down from 10-25 percent, which translates to $8 per barrel.

US employment numbers continue to shine, underscoring a robust US labor market. On Tuesday, JOLTS Job Openings improved to 5.43 million, beating the estimate of 5.41 million and above the previous reading of 5.38 million. Late last week, Nonfarm Employment Change surged to 292 thousand, crushing the estimate of 203 thousand. This was the strongest reading in 10 months. The unemployment rate remained unchanged at 5.0%, within the Federal Reserve’s definition of “full employment”. One area of concern in the employment picture is that of wage growth, which has not kept up with the strong improvement in payrolls. Even if the US economy is technically at “full employment”, slack remains in the labor market, meaning that employers are not under any pressure to raise wages. This was underscored by the Average Hourly Earnings in December, which posted a flat reading of 0.0%, short of the forecast of 0.2%. This key event is a leading indicator of consumer inflation, meaning that wages must increase before consumers will spend more, thus leading to more inflation. The minutes from the Federal Reserve’s last policy meeting indicated that inflation remains a key concern of policymakers, and inflation levels will play an important role in the timing and size of upcoming rate hikes in 2016.

WTI/USD Fundamentals

  • 5:30 US FOMC Member Stanley Fischer Speaks
  • 6:00 US NFIB Small Business Index. Estimate 95.4 points
  • 10:00 US JOLTS Job Openings. Estimate 5.41M
  • 10:00 US IBD/TIPP Economic Optimism. Estimate 47.6 points
  • 21:00 US President Barack Obama Speaks

*Key releases are highlighted in bold

*All release times are EST

WTI/USD for Tuesday, January 12, 2016

WTI/USD January 12 at 16:20 GMT

WTI/USD  Open: 31.31 Low: 30.41 High: 32.18 Close: 30.80

WTI/USD Technical

S3 S2 S1 R1 R2 R3
22.28 26.64 30.00 32.22 35.09 37.75
  • WTI/USD posted losses in the Asian session, but recovered and then moved higher in the European session. The pair has again reversed directions in North American trade and given up all of the earlier gains.
  • The round number of 30.00 has weakened in support as the pair trades at lower levels
  • There is resistance at 32.22

Further levels in both directions:

  • Below: 30.00, 26.64 and 22.88
  • Above: 32.22, 35.09, 37.75 and 39.87

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

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental and macroeconomic analysis, Kenny Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in major online financial publications including, Seeking Alpha and FXStreet. Kenny has been a MarketPulse contributor since 2012.