Crude Pauses After Nasty Slide, U.S. Nonfarm Payrolls Next

Crude prices are up slightly on Friday, but crude is still down 6.2% this week. The U.S. releases nonfarm payrolls and wage growth at 12:30 GMT, and these indicators could affect the direction of crude.
Kenny Fisher
oil field, the oil workers are working

U.S. crude prices are higher in Friday trade. In the North American session, WTI is trading at $52.73, up $0.38, or 0.74%. Brent crude is trading at $58.14, down $0.50, or 0.87%.

Crude Slides on Soft PMIs, Inventory Surplus

It’s been a rough week for U.S. crude, which has plunged 6.2%, the sharpest drop since mid-July. On Thursday, crude fell to 51.06, its lowest level since early August. Soft PMIs and a surplus in crude inventories have sent crude prices lower.

The September PMI reports, which were released this week, pointed to weakness in the manufacturing and services sectors. The Manufacturing PMI dropped below the 50-level for a fourth consecutive month, indicating ongoing contraction. The services sector has been stronger than manufacturing, but expansion slowed in September and was weaker than expected. Employment numbers have also softened this week. On Wednesday, ADP nonfarm payrolls for August dropped sharply to 135 thousand, compared to 195 thousand a month earlier. This was followed by jobless claims, which climbed to 219 thousand, up from 213 thousand a week earlier. Later on Friday, we’ll get a look at the official nonfarm payroll report. Will it follow in the path of the ADP release and soften in August? Wage growth, another key indicator, is expected to tick lower to 0.3%, after a reading of 0.4% in the previous release. If these key employment numbers are soft, nervous investors could snap up silver and send prices higher.

Global Slowdown Weighing on Crude Prices

The U.S. and China are the world’s largest oil consumers, and with both economies experiencing a slowdown, oil prices could continue to decline. The U.S. economy grew by just 2.0% in Q2, compared to a robust gain of 3.1% in the first quarter. The trade war with the U.S. has taken a toll on China’s economy and the manufacturing sector has been in contraction mode as exports have fallen off.  At the same time, geopolitical developments could reverse the downward trend in a hurry. Tensions between Iran and the U.S. have eased ever so slightly, but any negative developments could cause investment jitters and send crude prices higher.

WTI/USD 4-Hour Chart

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