Oil in the red as hospital bomb was not from Israel and Iran calling for oil embargo against Israel
|- Oil (WTI) trades drops below $88.
- The US Dollar is in a third consecutive negative trading day.
- Oil could edge further up, although the fading threat of supply cuts limits its upside potential.
Oil prices are sliding lower in another wild ride on Wednesday. The main driver for Oil prices is the visit from US President Joe Biden to Israel, which could not have been at a worse timing. Biden landed around 08:00 GMT in Tel Aviv, hours after a hospital was bombed in Palestine with hundreds of casualties. Biden is left to take a stance in the conflict while trying to defuse tensions, with any wrong word having the potential to make the current conflict between Israel and Hamas become a feared proxy war.
Meanwhile, The US Dollar (USD) is being torn in two camps. On the one hand, traders want to appreciate the Greenback with these tensions in the Middle East. On the other hand, the US macroeconomic numbers are starting to point to a possible recession for the US. Either way, the US Dollar is moving in tight ranges and is making baby steps lower for a third consecutive day when measured by the US Dollar Index (DXY).
Crude Oil (WTI) trades at $86.24 per barrel, and Brent Oil trades at $89.70 per barrel at the time of writing.
Oil news and market movers
- As the day advances, more proof and evidence is issued that the bombing of the Palestinian hospital was not done by Israel.
- Iran calls for oil embargo against Israel
- The Russian Ministry of Finance has set the cut-off price for Russian Rurals Oil at $75 per barrel. This is a substantial discount compared to Brent Oil, which is trading near $90, making it a $15 discount for India, China and other nations daring to buy Russian Oil with EU and US sanctions in place.
- Mexico has conducted its annual Oil-export hedging program. The price target with the hedged would allow the nation to sell their oil at $80 per barrel as floor.
- The American Petroleum Institute (API) released its report on Tuesday. After the build of 12.94 million last week, a drawdown of 4.383 million barrels was reported.
- The US Energy Information Administration (EIA) is due to print its weekly stockpile change at 14:30 GMT. Expectations are for a drawdown of only 0.3 million barrels after the 10.176 million build from last week.
Oil Technical Analysis: Tensions ease on hospital bombing
Oil prices are pushing higher as markets are pricing in a risk premium again. With several neighbouring countries starting to build up tensions on Israel to open up borders and let refugees flee the strip, pressure builds further toward a broader war. With that risk as hangover on the price action and possibly another big drawdown in US stockpiles, a pop in prices looks granted.
On the upside, the resistance level near $88 is the first level on the bulls’ radar. From there, the next level will be this year’s high at $94. Should a substantial squeeze unfold, look for $97.11, the high of August 2022.
On the downside, traders are bracing for the entry of that region near $78. The area should see ample support for buying. Any further drops below this level might see a firm nosedive move, which would cause Oil prices to sink below $70.
US Crude (Daily Chart)
WTI Oil FAQs
What is WTI Oil?
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
What factors drive the price of WTI Oil?
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
How does inventory data impact the price of WTI Oil
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
How does OPEC influence the price of WTI Oil?
OPEC (Organization of the Petroleum Exporting Countries) is a group of 13 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
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