|News||Crude contracts near $82.50 per barrel ahead of U.S jobs data|
|Analysis||Crude contracts traded around $82.50 per barrel in the Asian session ahead of the infamous labor report from the United States. The sentiment stabilized and the focus head to the U.S after China provided the first step into monetary tightening and withdrawal of excess liquidity signaling a near to be seen rate hike.|
Markets are anticipating the release of the U.S unemployment rate as well as the number of jobs lost in December, especially since expectations are for the rate to have stabilized at 10.0%, while December might have seen further stability with no payrolls change for the month following November’s loss of 11,000 employees. This, in its own role supports expectations that the US jobs market has indeed started to stabilize reflecting clearly on spending and consumption levels, which will support the economic recovery and help crude strengthen the upside bias with brighter demand prospects.
With further signs over improvement in the US and the global economy, crude is supported with rising demand expectations. Nevertheless, the fear is seen that with monetary tightening on fears over forming bubbles, over heating economies, and inflation all on the back of excessive liquidity will suppress the recovery pace and by that affect demand levels on crude.
China has already taken the first step, where the People’s Bank of China sold three-month at their highest interest rate in almost four months; the Chinese bank is attempting to manipulate the market and raise the cost of the three-month bills in an indication to the start of their effort to withdraw excess liquidity signaling a near coming move by the PBoC on interest rates. They are expected to raise the benchmark one-year lending ate to 5.85% by year end from the current 5.31%.
Yesterday, crude contracts for February recorded their highest at $83.32 and lowest at $82.50 per barrel, closing at $82.72 per barrel.
The S&P GSCI index closed at 542.58 levels, dropping by 5.29 points; meanwhile, the S&P GSCI energy index fell to close at 275.87 lower by 2.16 points.
This week crude managed to record the high of $83.50 per barrel, its highest in more than fifteen months, specifically since the cold weather that dominated on vast regions in the US, Europe and China played a strong role in supporting demand on heating fuel which strengthened by 19% since mid last December.
In NYMEX, heating oil future contracts for January delivery plummeted to record $2.18 per gallon down 0.4 cents; motor fuel declined by 0.5 cents to record $2.13 per gallon. Meanwhile, natural gas contracts rose by 1.2 cents to close at $5.82 per 1000 cubic feet. Concurrently in London, Brent contracts for February delivery dropped by 49 cents to record $81.20.
For today, we expect narrow range trading to prevail till the release of the U.S labor report. Contracts for February delivery opened today at $82.65 per barrel, recording the highest contracts at $82.80 and lowest at $82.15 per barrel and currently trading around $82.50 per barrel.