Crude oil pressured south ahead of weak jobs data
Crude started the day with tight ranged trading and with downside tendency with red covering Asian equities and into the European session as the dollar gained grounds and investors are cautious ahead of the key U.S. jobs report. Crude oil futures for October settlement started the day at $88.73 recording the high of $88.97 and currently around the low of $88.12 at $88.16 a barrel trending bearishly with the rising fears ahead of the nonfarm payrolls. The focus for crude in the current period remains the prospects for the recovery and the worse the situation is the more bearish pressure is piling on crude. Yesterday crude again restrained the downside pressure evident in the market on better than expected U.S. data which helped ease some pressure off the commodity. Data yesterday showed better than expected drop in weekly unemployment claims and that the manufacturing sector continued to expand in August opposed the expected contraction both bolstering oil's strength to counter the losses. Eyes today are on the infamous jobs report and the bearishness is clear with the expected slowing pace of hiring. The expectations for the nonfarm payrolls have been in downside revisions since the start of the week and now are expected with a slim 68 thousand jobs created down from 117 thousand in July and for the unemployment rate to hold at 9.1%. With the expected weak number oil is pressured to the downside trimming the second weekly advance, where the contract reached as high as $89.88 a barrel this week. We surely expect more losses for crude shall the jobs come even weaker than expected confirming the dire state of the economy and recovery in the United States which will automatically weaken demand prospects on oil. A stronger dollar is also of the bearish factors on crude, where the weak state of the global economy and risk aversion are keeping greenback resilient at the time the Fed restrained from immediate action to support the waning recovery and helped the dollar regain some lost strength on reduced QE3 bets. Volatile and choppy trading will prevail today till the jobs report and although the downside pressure is clear we still see upside support for crude to focus on, where the tropical depression shut rigs in the Gulf of Mexico and the eyes are still on the storm that might be strengthening over the weekend which will cause more evacuations and supply disruptions which might cause again an upside reversal for crude.