Oil halts decline at $86 after ADP turns out to be big miss on estimates


  • Oil (WTI) not enjoying the week as it trades below $90.
  • The US Dollar printed a new high in the US Dollar Index, though off the highs after ADP miss.
  • Despite supply cut confirmations and US stockpile drawdowns, prices remain under pressure. 

Oil prices are taking a turn for the worse with a batch of disappointments throughout this Wednesday. No surprises there as both Russia and Saudi Arabia keep their commitment to cut until December. Meanwhile, the American Petroleum Institute (API) issued its recent numbers overnight, communicating a drawdown of -4.21 million barrels last week against the build of 1.586 million the previous week and the monthly ADP job numbers turns to be a big miss on estimates. 

The US Dollar (USD), meanwhile, is gearing up for a very nervous trading day, while the US Dollar Index (DXY) resides near the high of the past 48 weeks. Expect to see a pick up in volatility as not only a big batch of data points is due to come out. But the Polish central bank is due to issue its next rate decision, and it promises to be a surprise after last week’s 75 basis point cut.

Crude Oil (WTI) trades at $86.50 per barrel, and Brent Oil trades at $88.80 per barrel at the time of writing. 

Oil news and market movers

  • Wednesday’s OPEC+ report had Saudi Arabia and Russia reaffirming plans to curb oil production by 1 million barrels per day for Saudi Arabia and 300,000 barrels per day for Russia until the end of the year. The report went on to say that the measure is intended “to reinforce the precautionary efforts made by OPEC+ countries with the aim of supporting the stability and balance of oil markets.” 
  • Russia said that a partial lift of the current fuel export ban has been discussed, according to TASS.
  • The current downturn in oil prices, despite these supply cuts, has mainly contributed to the current elevated level in US yields. Expectations are that demand will start to kill off and turn the current target lower as supply scales above a demand fall-off. 
  • As any normal Wednesday, the Energy Information Administration (EIA) is due to release its stockpile changes in the US. Expectations again call for a drawdown, this time from -2.17 million barrels to -0.092 million. The Cushing strategic stockpile reserve will get even more attention. Last week, it was already at a critical low level. Expect numbers to be issued near 14:30 GMT. 

Oil Technical Analysis: US slips on weak ADP

Oil prices drop like a stone despite OPEC+ trying to ramp up prices by confirming its current production cuts until the end of the year. Though in September markets set oil prices soaring on the back of that announcement, those same comments today are pushing prices lower. The current elevated level in US yields against the lower levels in September makes traders assess that demand will soon come to a standstill, where current total supply might be more than enough to deal with the slashed demand. 

On the upside, the double top from October and November of last year at $93.12 remains the level to beat. Although it got breached on Thursday, the level never got a daily close above it. Should $93.12 be taken out, look for $97.11, the high of August 2022.

On the downside, the floor at $88 is unable to support anymore. With $88 breaking, the peak of August 10 needs to be enough to catch the dip near $84.20. If that does not do the trick, a harsh decline to $78, sub $80, could materialize.

US Crude (Daily Chart)

US Crude (Daily Chart)

 

Natural Gas FAQs

What fundamental factors drive the price of Natural Gas?

Supply and demand dynamics are a key factor influencing Natural Gas prices, and are themselves influenced by global economic growth, industrial activity, population growth, production levels, and inventories. The weather impacts Natural Gas prices because more Gas is used during cold winters and hot summers for heating and cooling. Competition from other energy sources impacts prices as consumers may switch to cheaper sources. Geopolitical events are factors as exemplified by the war in Ukraine. Government policies relating to extraction, transportation, and environmental issues also impact prices.

What are the main macroeconomic releases that impact on Natural Gas Prices?

The main economic release influencing Natural Gas prices is the weekly inventory bulletin from the Energy Information Administration (EIA), a US government agency that produces US gas market data. The EIA Gas bulletin usually comes out on Thursday at 14:30 GMT, a day after the EIA publishes its weekly Oil bulletin. Economic data from large consumers of Natural Gas can impact supply and demand, the largest of which include China, Germany and Japan. Natural Gas is primarily priced and traded in US Dollars, thus economic releases impacting the US Dollar are also factors.

How does the US Dollar influence Natural Gas prices?

The US Dollar is the world’s reserve currency and most commodities, including Natural Gas are priced and traded on international markets in US Dollars. As such, the value of the US Dollar is a factor in the price of Natural Gas, because if the Dollar strengthens it means less Dollars are required to buy the same volume of Gas (the price falls), and vice versa if USD strengthens.

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content


Recommended content

Editors’ Picks

AUD/USD: Next on the downside comes 0.6500

AUD/USD: Next on the downside comes 0.6500

Further gains in the US Dollar kept the price action in commodities and the risk complex depressed on Tuesday, motivating AUD/USD to come close to the rea of the November low near 0.6500.

AUD/USD News
EUR/USD: No respite to the sell-off ahead of US CPI

EUR/USD: No respite to the sell-off ahead of US CPI

The rally in the Greenback remained well and sound for yet another session, weighing on the risk-linked assets and sending EUR/USD to new 2024 lows in the vicinity of 1.0590 prior to key US data releases.
 

EUR/USD News
Gold struggles to retain the $2,600 mark

Gold struggles to retain the $2,600 mark

Following the early breakdown of the key $2,600 mark, prices of Gold now manages to regain some composure and reclaim the $2,600 level and beyond amidst the persistent move higher in the US Dollar and the rebound in US yields.

Gold News
SOL Price Forecast: Solana bulls maintain $250 target as Binance lists ACT and PNUT

SOL Price Forecast: Solana bulls maintain $250 target as Binance lists ACT and PNUT

Solana price retraced 7% from $225 to $205 on Tuesday, halting a seven-day winning streak that saw SOL become the third-largest cryptocurrency by market capitalization.

Read more
Five fundamentals: Fallout from the US election, inflation, and a timely speech from Powell stand out

Five fundamentals: Fallout from the US election, inflation, and a timely speech from Powell stand out Premium

What a week – the US election lived up to their hype, at least when it comes to market volatility. There is no time to rest, with politics, geopolitics, and economic data promising more volatility ahead.

Read more
Best Forex Brokers with Low Spreads

Best Forex Brokers with Low Spreads

VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.

Read More

Forex MAJORS

Cryptocurrencies

Signatures