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Crude Edges Higher After Robust Payroll Report

David Becker
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Petroleum prices edged higher on Friday, despite a stronger than expected US payroll report which ignited riskier assets. Stock prices soared on the open and yields climbed higher, but crude oil traders were not willing to bid up prices, despite Wednesday’s stronger than expected draw in crude oil inventories. The term structure of crude oil prices is flatting moving away from contango which is generally considered bearish for crude prices.

Earlier in the morning, the Department of Labor released the non-farm payrolls report which was stronger than expected. According to the BLS non-farm payrolls increased by 203K in November compared to the 180K expected by economists. October’s series was revised slightly higher by 4K to 204k for the month and September was also revised higher by 4K.

The big surprise for investors was the decline in the unemployment rate despite an increase in the labor participation rate. The unemployment rate dropped to 7%, compared to expectations of a decline in the rate to 7.2%. According to the BLS the decline occurred because of an increase in 818,000 jobs during the month of November.

Hedge funds have been lining up on the long side of futures and options position according to the latest report for the CFTC. The commitment of traders report, released for the date ending November 26, 2013, showed that managed money increased long futures and options position by nearly 12K contracts while reducing short position by 1K contracts.

Crude oil prices moved higher but could not keep up with the solid upswing in stock prices. Crude oil is poised to test resistance near a downward sloping trend line at $97.50. Short term support is seen near the 10-day moving average at $95.00.

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