Oil supplies have risen much faster than expected, and that's putting serious pressure on crude.» Read More
The weak March jobs number was bad news for crude, but it certainly could have been worse for traders who were long black gold.
Only 88,000 jobs were createdwell under expectations of 200,000 new jobs. And while crude futures still dropped on the morning, they recovered nicely from their low of $91.91.
(Read More: Unemployment Rate Falls, but Don't Pop the Corks Yet)
So if the jobs report truly delivered terrible news about the economy, why did traders jump back into oil?
"It's a bad jobs number," said GRZ Energy President Anthony Grisanti. "But still, 88,000 people were hired. It's not like economic activity is stopping. There's still growth."
In addition, Grisanti points to the action in the dollar, which dropped off the number. "A weak dollar means higher commodities, and that's why crude is holding up."
Addison Armstrong, senior director of market research at Tradition Energy, similarly credits the dollar index with crude's partial recovery.
"Much of the news out there is bearish, and it certainly felt justified earlier this morning when crude was down as much as it was," Armstrong said. "But given that the dollar turned around on the non-farm payrolls number, that took some of the downward pressure out of oil."
And there's another factor. Crude has had a terrible week, and it can really only fall so far. After crude hit its morning low, Armstrong said, "you probably saw some short-covering."
Meanwhile, Grisanti is hoping crude does fall back below $92, but not because he's bearish. "If it gets back down to that $91.90, I would definitely be a buyer," the trader said.
Initial jobless claims rose to the highest level in four months last week, a third straight rise, indicating that the labor market recovery in the world's largest oil consumer slowed in March. Meanwhile, North Korea warned that its military has been cleared to wage an attack on the U.S. using "smaller, lighter and diversified nuclear" weapons.
Light, sweet crude for May delivery was down $1.30 at $93.14 a barrel, having fallen to $92.12, the lowest intraday price since March. Brent crude futures were down $1.25 to $105.86 a barrel, having earlier touched a low of $105.29, the lowest since early November.
(Read More: Brent Bounces Off Five Month Low After US Data)
Still, professional trader Jim Iuorio isn't ready to call it a buying opportunity.
After gold dropped to a 10-month low of $1,539.74 an ounce on Thursday, breaching a key technical level of $1,550, professional traders disagreed on how to trade it but came to a consensus on what's pushing it lower: U.S. dollar strength, thanks to money-printing by central banks around the world.
The dollar rose strongly against the Japanese yen on Thursday after the Bank of Japan announced aggressive measures to ease monetary policy, including a plan to double its holdings of bonds and stocks in two years. The yen fell as much as 2.9 percent versus the dollar, its largest one-day drop since Oct. 31, 2011 when it fell as much as 4.78 percent.
(Read More: Gold Ends Lower Despite Stimulus Hopes)
"We're in this mode where any sort of dollar strength—doesn't depend on why it's dollar strength—causes people to sell out of their long-term bullish positions," said pro trader Jim Iuorio from the Chicago Mercantile Exchange. "We were looking for what happened to the Japanese yen to happen, so I do think there is a bounce coming up relatively quickly in the short end."
Iuorio remains long gold, adding that he plans to buy the June gold futures contract at $1,548 with a target of $1,575 and a stop of $1,537.
Crude oil prices fell on Thursday after an increase in new U.S. claims for unemployment benefits reinforced concerns about sputtering economic growth in the top global oil consumer.
U.S. initial jobless claims rose to its highest level in four months last week, a third consecutive rise, suggesting the labor market recovery lost some steam in March.
Initial claims for state unemployment benefits increased 28,000 to a seasonally adjusted 385,000, the highest since November, the Labor Department said on Thursday.
"The jobless claims added to the pressure after the Bank of Japan's decision to pump money created a big rally in the dollar and U.S. debt in a safe-haven play," said Phil Flynn, analyst at Price Futures Group in Chicago.
The Bank of Japan on Thursday said it would inject about $1.4 trillion into the economy in less than two years, pushing the dollar up sharply versus the yen as U.S. Treasury debt prices also advanced.
Brent crude futures crude fell $1.16 to $105.95 a barrel, having fallen to a 2013 low at $105.73..
U.S. light, sweet crude was down $1.47 at $92.98 a barrel, having fallen to $92.56, the lowest intraday price since March.
Those looking to sell crude oil might soon get their chance.
Black gold tumbled on Wednesday, as it followed weakness in the equity market. Fundamentally speaking, crude's rally was overdone and was largely caused by short covering. On the long side, profits were taken once crude hit the $97.80 target.
(Poll: Is the Top in for Crude?)
Over the previous two sessions leading up to Wednesday, the market had tested the $95.90 and was able to hold that level. It gave hold on its third test, though, following the recent release of poor employment and manufacturing data, as well as government report that showed a build in inventories. The next major support at $95.55 did not hold and a retracement level at $94.75 also gave way. The market was able to slow down at $94.45 — the 50 percent retracement level on the way up.
We expect a consolidation day, as the equity market has bounced. Crude, though, will see pressure and will find it difficult to track equities when we have a U.S. dollar that is currently making new swing highs. Look for resistance against the $94.84 retracement level as a selling opportunity. At this time, only a close back above $95.55 or better yet, $95.90, will neutralize the sell-off.
(Read More: Oil Gives Up Gains after Dour US Data)
Realistically, the next down swing should test the $93.41 to $93.66 consolidation level that we saw before last week's rally. Below there, the next support sits at roughly $92.50.
Read on for 10 Things You Need to Know to Trade Futures
Chalk up the decline in gas prices to a divergence between gas and crude oil, Iuorio explained. Over the past month, gas has dropped some 5 percent, while crude oil has gained about 5 percent. In January, gasoline prices skyrocketed following an array of refining and maintenance issues while the price of oil fell. The move was highly unusual, so now the markets are seeing what's called a mean reversion, meaning prices are returning to the mean or average.
In addition, a government report said U.S. crude oil inventories grew to their highest level since 1990. The U.S. Energy Information Administration reported crude stocks rose 2.71 million barrels last week. The rise was slightly more than the build of 2.2 million barrels expected in a Reuters survey of analysts and put U.S. commercial inventories at 388.62 million barrels, the most since 1990 and close to the record 391.9 million barrels reached in 1982, the year the EIA started tracking inventories.
The yellow metal broke major support below the $1,590.4 level on Tuesday, and in doing so, traded to a low of $1,574 an ounce. With the momentum completely to the downside, Tuesday night's session opened up with the market trading lower and reaching a low of our $1,563.1 (our target) before consolidating and settling back towards $1,570.
(Read More: Gold Slides as Haven Appeal Dissipates)
Lately, the price of gold has been influence by any number of factors, including geopolitical events, monetary policy on the part of central banks around the world and more.
Early in Tuesday's session, gold struggled to hold the $1,600 level, but European economic data came in worse than expected, the U.S. dollar index traded higher.
The gold rally might be over, at least in the short-term, some professional traders told CNBC on Tuesday.
Gold has suffered two consecutive quarters of losses and it appears the second quarter isn't getting off to a good start either, as the precious metal fell 1.5 percent on Tuesday, its biggest one-day drop in more than a month. The second quarter, by the way, began on Monday.
(Read More: Gold Settles Lower on Wall Street Gains)
"If the yen is going to continue lower and there's no reason to buy the euro right now, that means dollar strength," said Iuorio. "Our economy is comparatively the best ship in the harbor right now. So if people buy the dollar, gold is going to go down."
The days of triple-digit prices for U.S. crude are "numbered" as the "crazy bull market" for oil continues to run out of gas, argued Citigroup analyst Seth Kleinman on Tuesday, even as West Texas Intermediate traded near its one-month high of $97 a barrel.
WTI shook off early weakness but still lost 13 cents to trade below $97 a barrel, while Brent crude for May delivery slid 70 cents to $110.38 a barrel. U.S. gasoline futures posted the biggest percentage drop in the oil futures complex, pushing below the 50-day moving average of $3.0477 a gallon, a technical level closely monitored by chart watching traders and analysts.
(Read More: Oil Loses Steam Even as Stocks Rally)
Kleinman, though, sees several reasons why crude oil could continue to fall in the near future.
Over the past month and a half, many people have made a big stink about copper's divergence from the S&P 500, and Jonathan Krinsky has been among them. In a Feb. 19 note, Miller Tabak's chief technical analyst wrote that a copper breakdown could lead to lower stock prices.
Now he's changed his tune. On Tuesday's episode of "Futures Now," Krinsky said, "The initial breakdown in copper is not necessarily a bearish indicator, if we are getting a structural change where a positive dollar is positive for stocks."
In other words, the negative correlation between stocks and copper can actually be explained by a third factor: the U.S. dollar. Since stocks and copper both tend to move inversely to the dollar, a rise in the currency tends to mean a drop in both copper and stocks. However, while copper's negative relationship to the dollar has held, we have recently seen stocks and the dollar become positively correlated.
You can see it on this chart:
CME Group brings buyers and sellers together through its CME Globex electronic trading platform and trading facilities in New York and Chicago.
Take your trading to the next level with a platform that lets you trade stocks, options, futures and forex all in one place with no platform or data with no trade minimums. Open an account with TD Ameritrade and get up to $600 cash.