BRENT CRUDE OIL FUNDAMENTAL BACKDROP
Brent crude oil is trading higher this morning after a tough few sessions post-FOMC as advancing U.S. Treasury yields have given the dollar upside support. Despite the ballooning USD, brent crude has held up relatively due to favorable inventory data including both API and EIA weekly stock releases.
The focus for today is the Non-Farm Payroll (NFP) data print which is expected at 200K. Although the correlation between ADP employment change and initial jobless claims are hardly anything to go by, a print higher than 200K could see brent crude trading lower by the end of the trading day. To close off Friday’s session, Baker Hughes rig count numbers which have been on the decline, may provide some backing for crude oil prices should this trend continue.
Looking at money market pricing on Fed interest rate probabilities in the table below, the terminal rate has risen to 5.175% in June after a peak of 5% in May just earlier this week. The consequent effect of this should this hold medium-term should limit crude oil gains. It will be interesting to see how OPEC+ reacts to these additional headwinds come the December meet and whether they may look at further output cuts.
FEDERAL RESERVE INTEREST RATE PROBABILITIES
BRENT CRUDE (LCOc1) DAILY CHART -UNDATED