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How US Jobless Claims Data Impact Oil Prices

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Jan. 17 2017, Published 2:37 p.m. ET

US initial jobless claims data

US (VFINX) (VOO) initial jobless claims were at 247,000 for the week ending on January 7, 2017, according to the U.S. Department of Labor’s report on January 12, 2017. The expectation had been for 255,000 initial filings for unemployment benefits.

Initial jobless claims show how many people are applying for unemployment benefits for the first time. As the number falls or remains low, it shows the improving job market. It can also hint at improving consumer spending power.

It could mean higher fuel demand, which would be bullish for crude oil. An improving job market would also warrant a rate hike by the Fed. Rising rates could mean a stronger US dollar.

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US Dollar Index and crude oil

The dollar usually has an inverse impact on crude oil prices. A stronger dollar makes crude oil more expensive for oil-importing countries and pressures prices. The opposite is also true. In the past five trading sessions, the correlation between crude oil prices and the US dollar was -29%. The small amount of negative correlation doesn’t fully show the historically inverse relationship between the US dollar and oil prices during the short period.

So, unemployment claims are an important factor for crude oil prices. The data can have a direct and indirect impact crude oil prices in more than one way.

Impact on energy ETFs

Energy ETFs are also impacted by economic data and the relationship between crude oil prices (UWTI) (USO) (OIIL) (USL) (SCO) (DWTI) (UCO) and the US Dollar Index (UUP). These ETFs include 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).

In the next part, we’ll discuss the relationship between crude oil prices and the S&P 500 Index.

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