Oil in the green as markets go into the weekend

WTI Oil heads towards $74 as the Federal Reserve’s dovishness brightens the demand outlook.
Oil outlook could confirm OPEC latest report as a pickup in economic activity is foreseen for the first half of 2024.
The DXY US Dollar Index trades steady at a near four-month-low, though it could turn around.

Oil prices rally for a third day in a row,, fueled by the outcome of Wednesday’s US Federal Reserve meeting and Chairman Jerome Powell’s dovish remarks. The Fed has confirmed to markets that rate cuts are coming in 2024, a sign that markets wanted to see. Lower interest rates ahead could mean a push in sentiment and economic activity, triggering an increase in demand for Crude.

Meanwhile, the US Dollar (USD) has lost over 2% of its value when gauged by the US Dollar Index (DXY) since Wednesday. The European Central Bank (ECB) surprised markets by not committing to rate cuts and mentioning cuts were not even an option. With still positive US economic data and the Fed ready to cut in 2024, the US economic outlook has brightened. Meanwhile, economic activity in the Eurozone has been stagnant for months and the ECB isn’t committed to cutting interest rates in 2024.

Crude Oil (WTI) trades at $72.20 per barrel and Brent Oil trades at $77.11 per barrel at the time of writing.

Oil News and Market Movers: Italy imports Nigerian crude

The Italian energy ministry has released interesting import numbers for Italy: Nigerian Crude reached an 8-month high on imports. Libya was the top supplier.
Qatar Petroleum has sold Crude below price, at an average discount of 90 cents against the Dubai benchmark price.
On Thursday, major central banks released their last monetary policy decision of the year. The Swiss National Bank (SNB), the European Central Bank (ECB), and the Bank of England (BoE) opted to keep rates unchanged at current levels. The ECB and the BoE rejected talks of upcoming interest-rate cuts, contrary to the Fed’s message on Wednesday.
Total Energies bought three WTI Midland cargoes, and has been bidding on three more cargoes for delivery in early January.
Macquarie Group issued a report saying that WTI and Brent will settle near the high $60’s to low $70s level for the first quarter of 2024.
At 18:00 GMT, the weekly Baker Hughes US Oil Rig Count data will be released. Previous was at 503.

Oil Technical Analysis: All about 2024

Oil prices could get some help, but not from OPEC+. Commodities are gaining ground as investors dissect the message from the Fed on rate cuts. Rate cuts mean lower interest rates, and thus more spending, growth, production, and more demand for commodities. Who would have thought last week that the Fed would be the one to save Oil from falling below $67, and not OPEC.

On the upside, $74 is the first hurdle that needs to be taken back by Crude bulls. Once through there, $80 comes into the picture. Although still far off, $84 is next on the topside once Oil sees a few daily closes above the $80 level.

Still, Oil is not out of the woods yet. The $67.00 level could still come into play, which aligns with a triple bottom from June, as the next support level to trade at. 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 were to 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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