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The Impact of US Job Data on Crude Oil

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US payrolls

US (VFINX) (VOO) non-farm payrolls rose 255,000 in July 2016, according to the U.S. Bureau of Labor Statistics report released on August 5, 2016. The expectation was for an increase of 180,000. The better-than-expected payroll number could impact the timing of the next rate hike since it hints at a recovery in the US economy (VFINX) (VOO).

The US payroll number is one of the most important economic data points that impacts interest rate decisions. The Market’s expectation of a rate hike following the news could boost the US Dollar Index (UUP), which could negatively affect crude oil prices. However, a strong labor market and a strong economy could mean strong crude oil demand. This would support crude oil prices. To find out more, read What’s the Correlation between Crude Oil and the Dollar Index?

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Effect on energy stocks

Our analysis here is important for crude oil–weighted stocks such as Abraxas Petroleum (AXAS), Triangle Petroleum (TPLM), RSP Permian (RSPP), Northern Oil & Gas (NOG), Oasis Petroleum (OAS), and Denbury Resources (DNR).

Economic data and the correlation of crude oil prices with the dollar index also affect ETFs such as the Direxion Daily Energy Bear 3X ETF (ERY), the First Trust Energy AlphaDEX ETF (FXN), the United States Brent Oil ETF (BNO), the Energy Select Sector SPDR ETF (XLE), and the United States Oil ETF (USO).

Below are the production mixes of the above crude oil–weighted stocks:

  • Abraxas Petroleum (AXAS): 66%
  • Triangle Petroleum (TPLM): 80.7%
  • RSP Permian (RSPP): 75.5%
  • Northern Oil & Gas (NOG): 86.9%
  • Oasis Petroleum (OAS): 87.3%
  • Denbury Resources (DNR): 94.9%

In the next part of this series, we’ll look at the weather forecast and see how it could impact natural gas prices.

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