Crude Jumps on Strong Employment, Manufacturing Data

Crude oil is showing gains for a second straight day. Currently, U.S. crude oil is trading at $51.78, up $0.56 or 1.14% on the day. Brent crude oil is down sharply, trading at $56.06, up $0.46 or 0.83%.

Crude Claws Above $51

After posting five consecutive losing weeks, will we see a turnaround in crude prices? Crude has fallen a whopping 19% during this slide and broke below the key $50 level earlier in the week. However, crude rebounded on Wednesday with strong gains and is pointing upwards on Thursday.

Investors gave a thumbs-up to crude on Wednesday, which jumped 3.5%. This was its best one-day gain since December 2019. The surge was a response to strong U.S. economic data.

First, ADP nonfarm payrolls sparkled in January. The ADP report showed that the 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 cheered but I would insert a note of caution – in the December release, the ADP report showed an excellent gain of 202 thousand, but the actual nonfarm payrolls report came in at just 140 thousand. Analysts are again predicting a much smaller gain than the ADP reading, with a forecast of 161 thousand.

There was more positive news, as the ISM Non-Manufacturing PMI improved in January to 55.5, up from 55.0 in the previous release. This beat the estimate of 55.1 and points to continuing expansion in the non-manufacturing sector. The ISM report found that the outlook for growth in 2020 remains favorable.

Technical Analysis

With crude pushing upwards, the line of 51.00 has switched to a support role. Below, there is a key support level at 50.00, followed by support at 49.00, which has held since January 2019. On the upside, crude is facing weak resistance at 52.00, followed by resistance at 53.50.