Oil in the green with Russia complying to production cuts
|- WTI Oil steady near $72, bouncing off a floor after Monday’s decline.
- US Secretary of State Anthony Blinken landed in Israel to outline measures to secure safe passage in the Red Sea.
- The DXY US Dollar Index holds above 102.00, with traders split between Goldilocks or geopolitical safe-haven scenarios.
Oil trades near $72, after briefly hitting $72.90 on Tuesday, bouncing off Monday’s low near $70, after Saudi Arabia lowered prices of its Oil exports into Asia. Meanwhile, analysts and fund managers are welcoming the current decline in Oil prices, which will bring inflation further down. Though, with a Goldilocks scenario in place, this means an economic boon around the corner with demand for Oil to pick up.
Meanwhile, the DXY US Dollar Index is holding ground at 102.00 despite some selling pressure overnight. US and Japanese equities jumped substantially in a risk-on mood. The Nikkei even printed a new 34-year high. Traders are ignoring the escalation in geopolitical tensions, with elections in Taiwan over the weekend and Middle East tensions alive after Israel claimed it found Chinese weaponry in the hands of Hezbollah.
Crude Oil (WTI) trades at $71.87 per barrel, and Brent Oil trades at $76.97 per barrel at the time of writing.
Oil News and Market Movers: Tension will do for now
- Russian oil exporting numbers reveal the nation is complying with the production cuts it agreed upon in the lateste OPEC+ meeting last year.
- Adding to the news of Saudi Arabia offering substantial discounts, Oil prices also reacted to rumours that shipping freight companies paid fees to Houthi rebels in order to get safe passage in the Red Sea region. These rumors were quickly dismissed by several shipping companies.
- US Secretary of State Anthony Blinken landed on Monday in Tel Aviv to further discuss the current situation with Israel’s Prime Minister Benjamin Netanyahu and to further outline an international task force that will monitor the Red Sea passage.
- With the decline in Oil prices, the US Consumer Price Index (CPI) on Thursday is expected to further come down. Lower prices could trigger a pickup in demand, with several oil-dependent projects coming back online.
- The American Petroleum Institute will release on Tuesday its weekly stockpile change numbers. There was a huge drawdown of $7.418 million barrels in the previous week, and there is no forecast for this week’s numbers.
Oil Technical Analysis: starting to turn
Oil prices are finding a floor as markets have priced in Aramco’s discounts for its sales. With this additional correction, several buyers could come back into the market at these substantially lower prices. Meanwhile, a goldilocks tone in global markets could spark up demand again, while frost temperatures have arrived in Europe and will trigger demand for energy commodities.
On the upside, $74 is still holding importance, although the level has become very chopped up. Once back above this, $80 comes into the picture. Still far off, $84 is next on the topside once Oil sees a few daily closes above the $80 level.
Below $74, the $67 level could still come into play as the next support to trade at as it aligns with a triple bottom from June. Should that triple bottom break, a new low for 2023 could be close at $64.35 – the low of May and March – as the last line of defence. Although still quite far off, $57.45 is worth mentioning as the next level to keep an eye on if prices fall sharply.
US WTI Crude Oil: 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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