Crude Climbs as ADP Nonfarm Payrolls Sparkles

Crude oil prices have bounced back in Wednesday trade. Currently, U.S. crude oil is trading at $51.09, up $1.67 or 3.37% on the day. Brent crude oil is down sharply, trading at $56.21, up $1.78 or 3.31%.

Crude Rebounds After Hitting 4-Week Low

After falling for five straight sessions, U.S. crude has bounced back on Wednesday with sharp gains. The catalyst for the upswing was a spectacular showing by ADP nonfarm payrolls for January. The indicator showed that the U.S. economy gained 291 thousand jobs, blowing past the estimate of 157 thousand. The ADP report found that the increase in jobs was well-balanced throughout the economy, with solid gains in manufacturing, services. Investors have cheered the news, and crude has responded with strong gains. Still, traders should treat the ADP numbers with caution; in the previous release, the ADP report showed an excellent gain of 202 thousand, but the actual nonfarm payrolls reports came in at just 140 thousand. We’ll get a look at the January nonfarm payrolls release on Friday.

 An OPEC Cut Could Lift Oil Prices

Earlier this week, Reuters reported that OPEC members and Russia were considering cutting crude output by a further 500,000 barrels per day due to reduced demand because of the coronavirus. This would likely be easier said than done, as the cartel has had trouble enforcing any agreements to cut output. Reuters also reported that Brian Gilvary, CFO of British Petroleum has estimated that the economic slowdown due to the virus will reduce oil demand in 2020 by some 0.5% of global demand, or between 300 thousand and 500 thousand barrels per day.

Technical Analysis

On the downside, there is pressure on the 51.00 level. Below, there is support at the 50.00 line, as silver moves back and forth around this key level. On the upside, there is weak resistance at 51.50, followed by resistance at the round number of 52.00.