- Oil price rallies higher, away from $72.00 ahead of Jackson Hole.
- Saudi Arabia reports three-year low in sales from its Oil exports
- The US Dollar Index hits a new low for 2024 and flirts with the 101.00 barrier.
Oil prices are floating around $72.00 after headlines emerge on a big miss in Oil sales numbers for Saudi Arabia. The Oil exports dropped to a three-year low, selling $17.7 billion in June. With this slump in exports, the government has delayed several projects and might see Saudi Arabia as efforts from all OPEC participants in the upcoming meeting in September to ramp up Oil prices, Bloomberg reports.
The US Dollar Index (DXY), which tracks the performance of the US Dollar against six major currencies, gets caught in what one could call a “perfect storm”. After an already significant correction this week, more losses were added on Wednesday after the biggest downward revision in Nonfarm Payrolls in over a decade and the Federal Reserve (Fed) Minutes of the Fed’s July meeting revealed calls for a rate cut already back then. Not many, near nill, bullish elements seem to be able to support the Greenback.
At the time of writing, Crude Oil (WTI) trades at $72.60 and Brent Crude at $76.33
Oil news and market movers: OPEC meeting getting ever more important
- Swiss bank UBS has issued a note saying that a recovery to $90 per barrel is on the horizon if OPEC remains cautious into its next meeting in September and if the Chinese economy can gradually recover further, Bloomberg reports.
- Overnight Crude stockpile numbers from the US Energy Information Administration (EIA) revealed a drawdown of 4.649 million barrels, way above the expected 2.8 million drawdown. Last week’s number was a build on inventory of 1.357 million, Reuters reports.
- A Bloomberg report on Thursday shed light on a shadow fleet of tankers that are circumventing sanctions on Russian Oil. These are very outdated tankers, not up to standards, and with little to no insurance in case something goes wrong. It remains unclear how much additional excess Oil has been released into the market on top of the already flooded supply side.
- Traders see a potential policy risk by OPEC after it committed earlier this summer to let loose its voluntary production cuts. More production cuts might be needed in order to keep Crude prices at current levels, Reuters reports.
Oil Technical Analysis: bounce for now
Oil sets forth another attempt to avoid another negative weekly close after having failed massively to do so earlier this week. Despite the large drawdown in US Crude stockpile numbers this week, it looks like WTI Crude and the US Dollar are in sync and that a recovery could not happen until both finally are able to turn around. US data this Thursday or the speech from Fed Chairman Jerome Powell on Friday could still spark that turnaround, supporting a less-weaker US Dollar and a small increase in Crude prices.
On the upside, it becomes very difficult to be bullish with a lot of resistance levels nearby. The first element to look out for is the pivotal $75.27. Next up is the double level at $77.65, which aligns with both a descending trendline and the 200-day Simple Moving Average (SMA). In case bulls are able to break above it, the 100-day SMA at $78.45 could trigger another rejection as it did last week.
On the downside, the low from August 5 at $71.17 is the best level for a bounce. Under $70.00, the $68.00 big figure is the first level to watch followed by $67.11, which is the lowest point from the triple bottom seen back in June 2023.
US WTI Crude Oil: Daily Chart
WTI Oil FAQs
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.
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.
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.
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.
Source: https://www.fxstreet.com/news/oil-extends-losses-for-fourth-straight-session-despite-large-decline-in-us-stockpiles-202408221115