U.S. crude has fallen below the $60, as tensions have eased dramatically in the Persian Gulf. Still, the markets remain unsettled and volatility could resume.
U.S. crude has lost ground on Thursday, after sustaining sharp losses in Wednesday trade. Currently, U.S. crude is trading at $58.78, down $1.16 or 1.98%. Brent crude oil futures are trading at $64.70, down $1.14 or 1.73%.
The volatility continues this week for U.S. crude prices. On Wednesday, crude declined by 4.4 percent, its biggest one-day loss since November 29th. Crude briefly jumped above the $65 level after reports that Iran had launched a missile attack on U.S. bases in Iraq. However, once it became apparent that the attack had only resulted in minimal damage, investors regained their composure. Crude prices fell below the $60 level for the first time since mid-December.
The Iranian move appears to have been carefully calculated to save face for domestic consumption, while at the same time ensuring that an unpredictable President Trump would not respond. Indeed, Trump tried to lower the flames in a White House announcement on Wednesday. Trump said that the Iranian attack had caused minimal damage and added that the United States is “ready to embrace peace with all who seek it.”
With both sides taking a step back, the scenario of a war between the U.S. and Iran has faded, and oil prices have dropped in response. Still, the markets remain unsettled, and traders should exercise caution. According to David Bahnsen, chief investment officer of The Bahnsen Group, “it will take some time to sort through the news to have a better feel for what it could mean to markets.”
On Wednesday, the December ADP nonfarm payrolls were stronger than expected. The economy created 202 thousand jobs, crushing the estimate of 160 thousand. This marked the highest level since April. This was followed by unemployment claims on Thursday, which dropped to 214 thousand, down from 221 thousand a week earlier.
Will the good news extend to the official nonfarm payrolls? Analysts are expecting a drop to 150 thousand, down from 266 thousand a month earlier. Wage growth is expected to rise to 0.3%, up from 0.2% in November. If these releases are stronger than expected, investor confidence could rise and oil prices could fall to lower levels.
U.S. crude has broken through several support levels since Wednesday. The line of 58.75 remains fluid. Below, there is support at 58.00. On the upside, the 50-EMA is at 59.10, followed by resistance at the round number of 60.00. Above, there is resistance at 61.50.
Kenny is an experienced market analyst, with a focus on fundamental analysis. Kenny has over 15 years of experience across a broad range of markets and assets –forex, indices and commodities.
