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    70.04 USD -2.02%

Oil spikes after hot US jobs data

Volatile oil trading was observed after this week’s headline US macro data.

Oil traded nearly 1% higher following today’s US labor market update, but investors remain indecisive, and volatility has been elevated after the data release.

US labor market is moving the markets

Earlier today, data showed that the US unemployment rate increased from a 50-year low of 3.4% to 3.6%. The US economy added 311,000 jobs, which is far more than market expectations of 205,000.

December’s change in total nonfarm payroll employment was lowered from +260,000 to +239,000, while January’s change was revised from +517,000 to +504,000. In light of these adjustments, the cumulative job increases for December and January were 34,000 less than originally reported. In context, this was a record 10th straight result above consensus estimates.

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Instead of remaining at 0.3% as anticipated, the average hourly wage growth dropped to 0.2%, and the average hours worked went down from 34.6 to 34.5. The outcome is reduced inflationary expectations, markets pricing in a lower Fed rate increasing curve, and a decline in the value of the US dollar. This is also pushing oil upwards.

Still, Federal Reserve Chair Jerome Powell’s hawkish remarks during his semi-annual testimony to Congress earlier this week have increased expectations of more rate rises in the world’s largest economy. These remarks were clouding the growth forecast and, therefore, the demand for energy.

More to read: FTSE drops further after UK data, eyes critical support

In addition, this week’s figures from China, the world’s largest crude oil importer, indicated a slower-than-anticipated rebound in China’s important manufacturing sector. During the first two months of 2023, Chinese crude oil imports were down 1.3% from the same period a year ago.

EU going green

On Friday, the European Parliament and the Council presidency secured a temporary political agreement to lower the EU’s final energy consumption by 11.7% compared to the forecasted level by 2030. Hence, the EU’s ultimate energy consumption would be capped at 763 million tons of oil equivalent, and its primary energy consumption would be 993 million tons of oil equivalent.

Every EU member state will contribute to efforts to cut energy use through indicative national objectives, which are scheduled to be revised and announced this and next year. For the deal struck on Friday to take effect, it must be approved by European Parliament and Council committees and accepted publicly.

Direction remains unclear

The support close to the uptrend line at $74 has been protected for the time being, and bulls have returned to the market in an effort to push the price higher. The next objective may be $78.

The medium-term outlook remains neutral as long as the price trades within the enormous triangular formation seen on the chart.

OIL FUTURES

WTI futures 1D chart, source: tradingview.com, author’s analysis

Tomáš is a financial reporter with US markets as his main field. Tomáš is an aspiring author and entrepreneur aspiring to help people get better in financial knowledge.

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