Central banks and crude oil
European Central Bank head Mario Draghi helped stop a free fall in crude oil and reminded us once again that central bank policies around the globe have an ongoing impact on the cost of oil (NYMEX:CLV14).
Traders expecting a big boost in quantitative easing (QE) were disappointed and as Draghi seemed to back off of earlier bold statements. Germany, of course, has fought full blown Quantatiev Easing and one of the reasons may be the cost of oil. The falling Euro and the rising dollar has put further strain on the Euro-Zone as it has cost a spike in energy costs in terms of Euro. Germany fears that those high costs may offset the export advantage they would normally get from the weak Euro.
Today it will be the jobs report that will drive oil as traders at least in the early part of the day as the market will try to get a handle on just when the Fed will raise rates. It has been the divergent path of interest rates between the United States and the rest of the world that has caused a major selloff across many commodities. A blockbuster jobs report would bring in interest rate timing expectations and could have the ability to have oil retest the $88 low, which has been my long term target. December is trading lower, something to remember come roll over time.
On the other hand another jobs day miss would raise fears that the economy is not firing on all cylinders and may make the Fed reconsider the march towards higher rates. In that case oil may test what should be the higher end of the new trading range in the high 94 handle just below 95 dollars even.
So what are they looking for in today's jobs report? The average guess is for nonfarm payrolls to come in around 215,000 but the whisper number by traders on the floor has it quite a bit higher. The unemployment rate is supposed to come in at an unchanged 6.1% against a falling labor force participation rate that should come in steady around 62.8%. Hourly earnings are supposed to go up 0.2% month over month.