Crude Oil Price Update – Strong Jobs Report Alleviates Some Recession Concerns

U.S. West Texas Intermediate crude oil futures are edging higher late in the session on Friday as a big jump in U.S. payrolls helped alleviate some of the worries over a recession. Nonetheless, the move was tentative, suggesting traders were still weighing demand concerns against tight supply.

Based on this assessment, we’re expecting heightened volatility in the crude oil market because one strong employment report is not enough to erase the threat of a recession. Especially since inflation overall, which came in at 8.6% in May, could come in higher in next Wednesday’s consumer inflation report.

Additionally, the Fed is still expected to raise interest rates aggressively in July and September. Furthermore, the U.S. economy contracted 1.6% in the first quarter and is on pace to decline 1.2% in the second quarter, according to the Atlanta Federal Reserve’s GDPNow tracker. Two quarters in a row of negative GDP is a widely accepted definition of a recession.

At 19:00 GMT, August WTI crude oil is at $104.68, up $1.95 or +1.90%. The United States Oil Fund ETF (USO) is trading $78.55, up $2.00 or +2.61%.

Short-Term Outlook

Trader reaction to a pair of 50% levels at $104.58 and $103.85 is likely to determine the direction of the August WTI crude oil market into the close on Friday.

Bullish Scenario

A sustained move over $104.58 will indicate the presence of buyers. If this creates enough upside momentum then look for a surge into the minor Fibonacci level at $106.81. This is a potential trigger point for an acceleration to the upside.

Bearish Scenario

A sustained move under $103.85 will signal the presence of sellers. If this generates enough downside momentum then look for the selling to possibly extend into the long-term Fibonacci level at $99.82.

Side Notes

The main trend is down so we’re likely to see sellers try to defend the trend at $104.58 to $106.81. They are going to try to form a potentially bearish secondary lower top. If successful then look for a retest of the main bottom at $95.10. Taking out this level will reaffirm the downtrend with the major support at $91.00 to $83.95 the next target.