- WTI fell more than 2% to $80.70 a barrel.
- The US reported weak data on the labor market.
- Tensions in the Middle East are easing, leading to a drop in price.
At the end of the week, West Texas Intermediate (WTI) barrels are experiencing sharp losses, mainly due to concerns about the US economy, the largest consumer of oil, after the release of weak data on jobs and economic activity. In addition, as tensions in the Middle East ease, markets are confident that there will be no supply or demand disruptions that will also contribute to the downside moves.
The U.S. Bureau of Labor Statistics released disappointing numbers as job gains in the U.S. economy missed expectations for October at 150,000 versus 180,000 expected and slowed from a revised previous figure of 297,000. Additionally, the unemployment rate rose to 3.9%, above the expected 3 .8%, while average hourly earnings rose 0.2% month-over-month, which was below projections and equal to a 4.1% year-over-year increase. Accordingly, if the US continues to reveal that its economy is weakening and that the cumulative effects of monetary policy are just beginning to set in, Oil prices may face further decline as less energy would be required from the world’s largest consumer.
On the positive side, as the Federal Reserve (Fed) nears the end of its tightening cycle, it would be beneficial for the WTI price, as higher rates tend to be negatively correlated with energy demand. In this sense, the focus of the market shifts to the next news before the following Fed meeting in December, including two more inflation measures and a jobs report.
WTI levels to watch
After evaluating the daily chart, neutral to bearish view is seen in WTI, with the balance starting to tip in favor of the bears, although they still have some work to do. The Relative Strength Index (RSI) has a negative slope below its midline, while the Moving Average Convergence (MACD) is showing neutral red bars. In addition, the price has broken below the 20 and 100-day simple moving averages (SMA), which appear to be converging towards the $83.00 area to make a bearish cross, which would likely trigger further downside for WTI in the near-term.
Support levels: $80.50, $80.30, $80.00.
Resistance levels: $81.60 (100-day SMA), $82.80, $83.50
