Oil traders dive into employment details

Yesterday, concerns about a less than optimistic growth outlook for the Eurozone crushed oil down to the lower end of its trading range channel. Not only that, weakening expectations on today’s jobs report help play into oil’s weakening demand sentiment story. Today oil will have to decide whether it is going to be safe to be short over the weekend as geopolitical risks rise in the aftermath of what will be a skewed monthly jobs report in the aftermath of Hurricane Sandy. Add to that the overnight earthquake that hit off the coast of Japan.

Not only will we see a drop off in hiring on the East Coast, there are many who had no way to file for unemployment. Traders may forget about worrying about the headline numbers and try to get a gauge on the overall data by looking at things like average hourly work etc. They are expected to come in at 34.4 hours. Expectations for job creation seem to be slipping as we get closer to the report. Of course when you have low expectations it is easy to be surprised.

Distillate supply is below normal but with the weakening prospects for European growth it seems traders can be patient. Of course with warm weather and a wildly bearish gasoline price outlook it takes some of the upside pressure off. Still with oil at the lower end of the range it is possible that we could have a significant snap back if the jobs market report rocks. Expectations have been for it to continue to fall. The earthquake in Japan also might mean that some traders might worry about a short-term demand hit.

CBS News reported that a strong earthquake struck Friday off the coast of northeastern Japan in the same region that was hit by a massive earthquake and tsunami last year. A city in the region reported that a small tsunami had hit, but there were no reports of injuries or damage. The Japan Meteorological Agency said the earthquake had a preliminary magnitude of 7.3 and struck in the Pacific Ocean off the coast of Miyagi prefecture at 5:18 p.m. (0318 Eastern). The epicenter was 6.2 miles beneath the seabed. After the quake, which caused buildings in Tokyo to sway for at least several minutes, authorities issued a warning that a tsunami potentially as high as 2.19 yards could hit. Ishinomaki, a city in Miyagi, reported that a tsunami of 1 yard hit at 6:02 p.m. (0402 Eastern). The Pacific Tsunami Warning Center said there was no risk of a widespread tsunami, and subsequently dropped all tsunami warnings for the Japanese coast. Miyagi prefectural police said there were no immediate reports of damage or injuries from the quake or tsunami, although traffic was being stopped in some places to check on roads. Shortly before the earthquake struck, NHK television broke off regular programming to warn that a strong quake was due to hit. Afterward, the announcer repeatedly urged all near the coast to flee to higher ground. The response is an indication of how deeply the 2011 disaster affected the densely-populated island nation's psyche.

The magnitude-9.0 earthquake and ensuing tsunami that slammed into northeastern Japan on March 11, 2011, killed or left missing some 19,000 people, devastating much of the coast. All but two of Japan's nuclear plants were shut down for checks after the earthquake and tsunami caused meltdowns at the Fukushima Dai-Ichi nuclear plant in the worst nuclear disaster since the 1986 Chernobyl disaster. Immediately following Friday's quake, there were no problems at any of the nuclear plants operated by Fukushima Dai-Ichi operator Tokyo Electric Power Co., said a TEPCO spokesman, Takeo Iwamoto.

The natural gas withdraw came in larger than market expectations but was generally priced in. The EIA said that working gas in storage was 3,804 Bcf as of Friday, November 30, 2012, according to EIA estimates. This represents a net decline of 73 bcf from the previous week. Stocks were 33 Bcf less than last year at this time and 168 Bcf above the 5-year average of 3,636 Bcf. In the East Region, stocks were 16 Bcf below the 5-year average following net withdrawals of 56 Bcf. Stocks in the Producing Region were 130 Bcf above the 5-year average of 1,143 Bcf after a net withdrawal of 14 Bcf. Stocks in the West Region were 54 Bcf above the 5-year average after a net drawdown of 3 Bcf. At 3,804 Bcf, total working gas is within the 5-year historical range.

About the Author
Phil Flynn

Senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. He is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets. His precise and timely forecasts have come to be in great demand by industry and media worldwide and his impressive career goes back almost three decades, gaining attention with his market calls and energetic personality as writer of The Energy Report. You can contact Phil by phone at (888) 264-5665 or by email at pflynn@pricegroup.com. Learn even more on our website at www.pricegroup.com.


Futures and options trading involves substantial risk of loss and may not be suitable for everyone. The information presented by The PRICE Futures Group is from sources believed to be reliable and all information reported is subject to change without notice.

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