US Crude Slides as Canadian Wildfire Diminishes

US crude has kicked off the week with losses, as the commodity trades at $44.02 per barrel in the Monday North American session. Brent crude is trading at $44.35, as the Brent premium stands at $0.33. On the release front, it’s a quiet start to the week, with just one US event on the schedule. The US Labor Markets Conditions Index posted a third straight decline, coming in at -0.9 points.

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. The markets are keeping an eye on Crude Oil Inventories, which will be released on Wednesday. Last week’s release showed a sharp surplus of 2.8 millions, marking a 3-week high. Elsewhere, Saudi Arabia fired its oil minister, Ali al-Naimi after 20 years on the job. This has created some uncertainty, as the move could lead to changes in the country’s oil policy.

Is the US labor market showing signs of fatigue? Nonfarm Payrolls looked awful in April, 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. The ADP Nonfarm Payroll report dropped to 156 thousand, compared to an estimate of 205 thousand and Unemployment Claims jumped to 274 thousand, missing the estimate of 261 thousand. 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%.

Will the Federal Reserve raise rates in the near future? 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 appeared to leave the open to a June hike, but the weak 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.

WTI/USD Fundamentals

Monday (May 9)

  • 10:00 US Labor Markets Conditions Index. Actual -0.9 points

*Key events are in bold

*All release times are EDT

WTI/USD for Monday, May 9, 2016

WTI/USD May 9 at 11:10 EDT

Open: 45.61 Low: 43.86 High: 45.77 Close: 44.02

WTI/USD Technical

S3 S2 S1 R1 R2 R3
37.75 40.00 43.45 46.69 50.13 51.59
  • WTI/USD showed limited movement in the Asian session. The pair posted losses in the European session and the downward trend has continued in North American trade
  • 43.45 is under pressure as a support line
  • 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.