- Oil (WTI) steady near $83.80, down for a fifth consecutive day.
- The US Dollar sees volatility soar with two 1% intraday moves in a row in the US Dollar Index, back flat for the week.
- Oil faces risk of falling to $80 as markets struggle to identify floor.
Oil prices are finding some sort of support ahead of the weekly Energy Information Administration (EIA) numbers, with losses summing up to an already 8% decline from its peak on October 20, as diplomacy is ruling in the escalated tensions between Israel and Palestine. Several heads of states are gathering in order to get more done on the humanitarian front in Gaza. With the pushback on the Israeli ground offensive in the region, the risk of a broad proxy war in the Middle East is decreasing by the day, which means further selling pressure in Oil prices.
Meanwhile, The US Dollar (USD) made a staggering return on Tuesday and tries to consolidate these gains this Wednesday. The US Dollar Index was close to post a new high for this trading week, though it was unable to pull it off after the US closing bell. Expect the US Dollar to trade a rather tight range for this Wednesday, ahead of the European Central Bank meeting and US Gross Domestic Product numbers on Thursday.
Crude Oil (WTI) trades at $83.44 per barrel, and Brent Oil trades at $87.22 per barrel at the time of writing.
Oil news and market movers
- Oil experts have warned that any risk related to Israel or Palestina, could convince OPEC+ to loosen its output restrictions.
- Divergence between US and Canadian Oil prices as Canadian oil prices are weakening despite pipeline bottlenecks occurring in Canada, restricting shipments to refiners. Canadian pipelines were forced to ration their space this year amid rising Oil production.
- The American Petroleum Institute (API) released its weekly figures overnight on Tuesday. Previous number was a drawdown of 4.383 million, and the actual number at 2.668 million drawdown in barrels.
- At 14:30 GMT, the weekly Energy Information Agency (EIA) will release its stock figures. The previous number was a drawdown for 4.383 million barrels. Expectations for this week are between a drawdown of 3 million and a build of 2 million. Any bigger build than 2 million barrels will trigger another leg lower in Crude prices.
- Russia struggles to lift Oil exports, as its Oil-product exports plunged to the lowest in more than three years. Diesel exports slumped to 769,000 barrels a day this month.
Oil Technical Analysis: A temporary floor
Oil prices are retreating further from their peaks as the Israeli ground offensive is being pushed back. Though, there were other signs that could count as a foretelling sign that Crude prices were due to retreat. Each time several banks are starting to jack up their forecast calls towards $150 per barrel, often the opposite happens, as speculators are getting too greedy with big sellers more than happy to get paid at elevated levels while global demand is fading and an oversupply is at hand.
On the upside, $84.25 is the new resistance. Should Crude be able to print a similar performance as the US Dollar Index did on Tuesday, expect even a quicker sprint to $88. Should Oil prices be able to consolidate above there, the topside for this fall near $93 could come back into play.
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.
-638338207490614995.png)
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.
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
Editors’ Picks
EUR/USD treads water just above 1.0400 post-US data
Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
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.