U.S. Crude Slips to 5-Week Low as Investor Confidence Rises

U.S. crude continues to lose ground and briefly fell below the $58 on Monday. With Middle East tensions subsiding, the slide could continue.
Kenny Fisher
WTI Crude Oil

U.S. crude has continued its losing ways at the start of the week and is down for a sixth successive day. Currently, crude is trading at $58.34, down $0.84 or 1.35%. Brent crude is trading at $64.28, down $0.72 or 1.11%.

Crude Briefly Drops Below $58

It was a rough week for U.S. crude, which fell 6.2% last week, its biggest one-week decline since July. The downturn has continued on Monday, with crude touching a low of $57.98, its lowest level since December 6th.

Investor risk appetite has made a fast recovery after the recent showdown between the U.S. and Iran raised fears of war in the Middle East and sent crude above $65 per barrel. However, Iran and the United States both stepped down and tensions have significantly eased. With no immediate danger to crude production or supply routes, oil prices have taken a tumble since last week.


U.S Nonfarm Payrolls Slide

The U.S. labor market has been a driving force in the success of the U.S. economy, but December employment numbers, released on Friday, were a major disappointment. Nonfarm payrolls dropped sharply to 145 thousand, compared to 266 thousand a month earlier. This missed the estimate of 162 thousand. Wage growth fell by 0.1% to 2.9%, its lowest level since July 2018. The unemployment rate remained unchanged at 3.5 percent.

Despite all the talk about a ‘tight’ labor market, weaker real wages will likely translate into reduced consumer spending, which could spell trouble for economic growth in 2020 and weigh on oil prices.

Technical Analysis

WTI/USD is on a downward trend. There is support at 58.00, followed by support at 57.25. On the upside, there is weak resistance at 58.75. The 50-EMA line is close by, at 59.09. This is followed by resistance at the round number of 60.00.

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