Crude Rises to $45 as Canadian Wildfire Disrupts Production

US crude has posted gains on Thursday,  continuing the upward trend seen on Wednesday. US Crude is trading at $44.98 in the North American session. Brent crude is trading at $45.62, as the Brent premium has narrowed to $0.64. On the release front, Unemployment Claims jumped to 274 thousand, higher than expected. On Friday, the US releases three key employment indicators – Average Hourly Earnings, the Unemployment Rate and Nonfarm Payrolls.

Crude posted strong gains earlier in the day and briefly pushed above the $46 level before retracting. A wildfire in Northern Alberta has forced the evacuation of 90,000 people from the town of Fort McMurray. Oil production in the region has been disrupted as several facilities were forced to shut down operations. Meanwhile, the worldwide glut of oil continues to weigh on oil prices, although prices have moved higher in recent weeks. An oil summit in Qatar in April ended without an agreement on capping production, leaving room for prices to drop. OPEC members will meet on June 2, and will likely revisit the issue of freezing production in order to raise prices. On Wednesday, Crude Oil Inventories posted a sharp gain of 2.8 million, its highest surplus in three weeks. US crude had shown gains earlier on Wednesday, as a large forest fire in the Alberta oil sand region has disrupted production in the region.

The US labor market has looked excellent in 2016, but this week’s employment numbers have raised concerns with weak numbers. Unemployment Claims jumped to 274 thousand, marking the third straight week that the indicator has risen. This reading was higher than the forecast of 261 thousand, and marked a five-week high. This release comes on the heels of ADP Nonfarm Payrolls, which dropped sharply in April to 156 thousand. This was the weakest reading in over two years, and surprised the markets, which have grown accustomed to releases above the 200-thousand level. We’ll get a look at the all-important Nonfarm Payrolls on Friday. If the NFP report misses expectations, the US dollar could respond with losses. Although the employment picture has been a bright spot in the US economy, consumer confidence and spending have not kept pace. Last week, UoM Consumer Sentiment dipped to 89.0 points short of the estimate of 90.3 points. This also marked the fourth straight drop for the key indicator. Consumer spending is a key engine of economic activity, and softer numbers in the first quarter were an important reason that US GDP weakened in the first quarter, with a lukewarm reading of 0.5%.

WTI/USD Fundamentals

  • 7:30 US Challenger Job Cuts. Actual 5.8%
  • 8:30 US Unemployment Claims. Estimate 261K. Actual 274K
  • 10:30 US Natural Gas Storage. Estimate 69B
  • 11:30 US FOMC Member James Bullard Speaks
  • 19:15 US FOMC Member James Bullard Speaks

Upcoming Key Events

Friday (May 6)

  • 8:30 US Average Hourly Earnings. Estimate 0.3%
  • 8:30 US Nonfarm Employment Change. Estimate 203K
  • 8:30 US Unemployment Rate. Estimate 5.0%

*Key events are in bold

*All release times are EDT

WTI/USD for Thursday, May 5, 2016

WTI/USD May 5 at 11:20 EDT

Open: 44.43 Low: 44.41 High: 46.02 Close: 44.98

WTI/USD Technical

S3 S2 S1 R1 R2 R3
37.75 40.00 43.45 46.69 50.13 51.59
  • WTI/USD was flat in the Asian session. The pair posted strong gains in the European session but has retracted in North American trade.
  • 43.45 is providing support
  • 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

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.