Oil sideways at $80 as markets are in the last straight line toward Powell's speech
|- Oil (WTI) trades at $79.86 and holds cards to close back above $80.
- The US Dollar strength is rolling through markets in the wake of Powell's speech later this Friday.
- The surprise draw down from Wednesday is seeing follow-through on Thursday and Friday.
Oil prices are in a wait-and-see pattern in the late European trading hours, ahead of the publication of the long awaited speech from US Federal Reserve chairman Jerome Powell and after a big drawdown beat from the US oil reserve figures past Wednesday. The WTI Crude Oil price has seen a double bottom being formed at $77.53 with both Wednesday and Thursday price action bounce off of that level. This morning headlines out of Russia are pushing prices back up again as suddenly supply to the market is starting to slow down a touch.
Crude will be closing off the week with the Baker Hughes US Oil Rig Count. Last week the print of 520 was the lowest since February of 2022. Although Franklin did not really pose a threat to the Texas basin, a further decline in rig count numbers could underpin price action even further in Crude prices.
At the time of writing, Crude Oil (WTI) price trades at $79.74 per barrel andBrent Oil at $83.67.
Oil news and market movers
- As of 14:00 GMT, a lot of headlines are expected out of the Jackson Hole Symposium: US Fed Chair Jerome Powell will give his keynote speech. Next at 15:00 GMT, the Fed’s Patrick Harker will speak alongside Loretta Mester. At 18:00 GMT, the Fed’s Austan Goolsbee will be taking the stage. Half an hour later, the Fed’s Loretta Mester is due to speak again at 18:30 GMT. To round out the week, Christine Lagarde from the European Central Bank (ECB) will speak at 21:00 GMT.
- The weekly Baker Hughes US Oil Rig Count for this week will come out at 17:00 GMT. The last print at 520 was another contraction and is at the lowest level since February 2022. Any further drops in rig counts could see an uptick in Crude prices as US production supply is seen further deteriorating.
- A disturbance with a 70% chance of becoming a cyclone is projected to reach Florida some time next week.
- US mulls easing Venezuelan oil sanctions in exchange for improved democracy ahead of elections next year.
- Russian fuel exports are heading for a 15-month low amid increased domestic demand.
- Canadian heavy crude weakens as TMX pipeline expansion faces possible delay.
- US officials have acknowledged that they and Iran have a secretive informal deal on oil flows between the two nations.
Oil Technical Analysis: in the eye of the storm
The Oil price is ticking up with the Relative Strength Index (RSI) moving away from the mid 50 level. The pickup comes after a floor was found near $77.57 from Wednesday onwards. The surprise cut in oil reserves of over 6 million barrels published on Wednesday has triggered a technical bounce as demand is expected to pick up while supply is steady to lower with Russian oil hitting markets at a 15-month low in volume.
On the upside, $81.68, Monday’s high, is the one to beat in order to trigger a small uptrend. Should WTI continue its performance of higher lows and higher highs, pressure could build toward $82. In order to print a fresh monthly high, the peak of mid-August at $84.32 is the one to beat when demand takes over and supply cannot follow suit.
On the downside, a temporary bottom is being formed around $77.50 and acts as a base for this week. Should the Baker Hughes Rig Count jump substantially higher, expect to see the floor being tested as more supply is bound to come online. Once bears make it through that orange box level, expect to see more downside toward $74 before finding ample support to slow down the sell-off.
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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