WTI was extending its losses after the nonfarm payrolls data, reaching a low of 54.55 before recovering back to the 56 handle.
The nonfarm payrolls data arrived as follows:
20k vs 180k headline - This is the worst since Sept 2017. the prior was 304K and revised to +311K. However, not all is bad in the detail of the report.
The Greenback dropped from 97.40s to a low of 97.25 in the DXY and then chopped sideways for the rest of the day between 97.31/43 (Besides the drop, the dollar is still strong following the break-up from the H&S neckline at 96.60/70 area ( At a 10-year high, wage growth for American workers likely to keep accelerating and that is something from the jobs data that is supporting the greenback (as well as dovish ECB/RBA/BoC).
Oil prices were already struggling on the China and US trade data this week on signs of a worsening demand outlook due to concern over global growth slowing down. China recently downgraded domestic GDP from 6.5% to between a range of 6-6.5% - The Australian GDP was also a big disappointment. However, oil price managed to recover a good portion of the losses on Friday, bounding from the lows with a surge to the upside of over a dollar, finishing higher for the week following a third-weekly decline in U.S. oil-drilling rigs pointed to a potential fall in domestic production activity. Baker Hughes reported that the number of active U.S. rigs drilling for oil dropped by nine to 834 this week, following a decline of 10 in the oil-rig count a week earlier - The total active U.S. rig count also edged down by 11 to 1,027, according to Baker Hughes.
The price has proven its fragility at the trend line support est.11th Feb which shall no longer be trusted. That support has been shifted to the lows on Friday located at 54.55 - The Kijun-sen. An additional offer at this juncture will make for a bearish case according to the bearish cloud in development. If the 55.56 lows seen at the start of this month are broken again, bears will look for a run back towards the 50 handle with the confluence of the 23.6% Fibo target at 50.20. Bulls have eyes on a target of the recent tops of 57.17 (78.6% Fibo) ahead of the 57.85/93 double-tops - (However, bulls need to get and hold above the 50% retracement of the March decline at 56.20).
The bulls regained poise in the European session and drove WTI (oil futures on NYMEX) to hit fresh weekly tops at 57.45, as Brexit optimism lifted the appetite for the risk assets such as oil. Moreover, increased expectations of tightening oil markets also added to the bullish tone in oil prices, as OPEC’s de facto leader Saudi Arabia looks set to deepen the cartel’s supply cuts.
On Monday, a Saudi Arabian Government official noted that the Kingdom is planning to extend deeper-than-agreed oil cuts into April to below 7 million barrels per day (bpd), while keeping its output “well below” 10 million bpd.
In addition, a broadly weaker US dollar amid risk-on trades and the recent bullish US drilling sector activity report also continues to offer support to the bulls. Further, supply disruption risks, in the wake of the political and economic crisis in OPEC-member Venezuela, remains a key catalyst for the recent upsurge in the barrel of WTI.
Looking ahead, markets eagerly await the weekly US crude supplies report due to be published by the American Petroleum Institute (API) at 2130 GMT for fresh trading impetus.
WTI is taking the bids around $57.00 during early Asian hours on Wednesday. The energy benchmark manages to remain firm as private inventory data shows a surprise draw in weekly stock. Reports of supply cut extension and EIA forecasts entertained traders during Tuesday.
The American Petroleum Institute (API) released details of stockpiles survey for the week ended on March 04. As per the results, crude oil inventories surprisingly registered a draw of -2.58 million barrels compared to a build of 7.29M during last week. Reductions were also reported in gasoline stocks by -5.85M but distillate inventories grew +195K.
As the API reports are considered to be an early signal for the official weekly oil stock change report from Energy Information Administration (EIA), traders responded to the decline in inventories with sustained buying.
Earlier during Tuesday, energy traders maintained their buying bets as the latest news from OPEC members signaled readiness to extend supply-cuts. Though, bulls were softly challenged later as EIA cut its forecasts for global oil demand by 20,000 barrels per day to 1.46 million bpd and 40,000 barrels per day to 1.45 million bpd for the years 2020 and 2019 respectively.
Investors may now await official EIA stockpile report, up for release at 14:30 GMT during today. The report last showed an increase in oil levels by 7.069M and bears the market consensus of 2.861M for the present release.
WTI Technical Analysis
In spite of flashing a fresh high of the week, WTI sweet light crude oil continued to remain beneath $58.00 round-figure, a break of which could help the energy price to rise toward $58.80 and $59.10.
Alternatively, 100-day simple moving average (SMA) level of $54.30 can offer strong support ahead of providing small stops around $55.60.
DislikedInteresting cross-currents: WTI is up on report of inventory drawdowns, while US stocks are diving on Boeing issues. If the report of US grounding the Max 8 is correct, they cannot fly inside the US, which means Boeing cannot even make ferry flights to deliver new Max 8 & 9 aircraft. Will the downturn in equities begin to affect WTI?Ignored
In H2 some extra triggers will be added