- WTI Oil is facing a firm downturn in the coming trading day.
- The US Dollar rallies on the publication of the Fed Minutes.
- Oil is at risk of dropping back to $74 and lower, as more bearish elements emerge.
Oil prices are falling like a rock at the US trading session as markets are repricing recent string of events. The recent repricing is granted after a ceasefire between Israel and Palestine and the overnight numbers from the American Petroleum Institute revealed a very substantial build in US stockpiles. These key elements are enough to send Oil prices lower this Wednesday.
Meanwhile, the US Dollar (USD) is soaring after the latest Fed Minutes was published on Tuesday night. Although no surprises, markets got spooked a bit by the fact that all members were unanimously agreeing not to move rates anytime soon. This means that markets need to pull back a bit of their earlier enthusiasm that rate cuts could emerge very soon. The latest Minutes thus reveal that markets have been a bit too enthusiastic, which means that yields could start soaring a bit and the Greenback gains a bit of strength in the US Dollar Index (DXY).
Crude Oil (WTI) trades at $74.67 per barrel and Brent Oil trades at $79.28 per barrel at the time of writing.
Oil news and market movers: Bearish elements too strong
- OPEC+ might need to cancel this weekend’s meeting as Saudi Arabia is not happy with the unwillingness of other countries to cut production, in order to support crude prices.
- The overnight build in stockpile numbers reported by the American Petroleum Institute (API) on Tuesday evening revealed a 9.047 million build in barrels. This further confirms the element that the US is ramping up production.
- The fact that US production and stockpiles are soaring, will urge OPEC to agree on deeper cuts. Efforts from Saudi Arabia will not be enough and a joint approach will be needed if OPEC+ wants to keep Oil prices where they are at the moment.
- A packed commodities calendar this evening with Thanksgiving shortening the trading week in the US:
- Near 15:30 GMT the Energy Information Administration (EIA) will release the change in crude stockpile in the US: Expectations are for a minor build of 0.9 million against 3.6 million last week.
- The EIA is also due to release near 17:00 GMT the Natural Gas Storage Change for last week: Expectations are for a build of 1 billion cubic feet against 60 billion last week.
- The Baker Hughes US Oil Rig Count numbers are due at 18:00 GMT. The previous result was 500 with no forecast pencilled in.
Oil Technical Analysis: even lower demand as before
Oil prices are gearing up for a very packed US calendar. All numbers that normally would come out from Wednesday to Friday, will now be concentrated on this Wednesday evening as Thanksgiving is taking place on Thursday. Expect to see substantial volatility. For now crude prices are steady despite the headlines about a ceasefire in the Middle East and the recent build in US stockpile. Should this Wednesday evening’s EIA numbers reveal a similar big build, expect to see a substantial drop ahead of the OPEC meeting this weekend.
On the upside, $80.00 is the resistance to watch out for. Should crude be able to jump higher again, look for $84.00 (purple line) as the next level to see some selling pressure or profit taking. Should Oil prices be able to consolidate above there, the topside for this fall near $93.00 could come back into play.
On the downside, traders are seeing a soft floor forming near $74.00. This level is acting as the last line of defence before entering $70.00 and lower. Once in that area, markets might factor in the risk of a surprise intervention from OPEC+ to jack up Oil prices once again.
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-faces-headwinds-as-gaza-ceasefire-and-stockpile-build-weigh-on-crude-prices-202311221145