It’s been quite a week with oil prices finally breaking out of their 3 month-long trading range, that marked the tightest trading pattern in a decade.  Of course it happened during the CERA week conference that started with optimism for oil producers around the world, and seems to be ending on a much different note.  This article from Reuters made waves yesterday as it suggested the Saudi’s made it quite clear to US producers during the meeting that they should not rely on OPEC to keep prices propped up for them.

Quite fittingly, yesterday marked the first day since November 30, the day OPEC officially announced its production cut plan, that WTI settled below $50/barrel.  ULSD prices also reached 3 month lows during the sell-off, with Gulf Coast prices hit especially hard as refinery rates have picked up and put heavy pressure on basis values this week.  Gasoline prices have fared relatively well during the sell-off with the spring RVP transition negating about a nickel’s worth of the 10 cent decline in futures this week.

The February jobs report showed more steady growth in employment.  This report is the last major data point before the FOMC’s meeting next week, and seems to have all but guaranteed the next interest rate hike.  FED Fund futures are now showing a 95% probability of a 25 point increase next week.  Energy prices have reacted positively to the report, doubling their early-morning gains in the 15 minutes after its release.

So, where do we go from here?  If prices can hang on to the small recovery they’ve had so far this morning, it’s likely we could see a short consolidation period as the market catches its breath and waits on the FED’s announcement next Wednesday.  If these gains do not hold however, the perceived long-liquidation that’s going on could easily drive another 5% decline in short order.  We’ll get to see the latest fund positions  in the CFTC report later this afternoon after futures settle.  That report may not show much however since the positions were compiled Tuesday, before the big sell-off occurred.

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Market Update (8)

Total non-farm payroll employment increased by 235,000 in February, and the unemployment rate was little changed at 4.7 percent, the U.S. Bureau of Labor Statistics reported today. Employment gains occurred in construction, private educational services, manufacturing, health care, and mining.