- Crude oil is trading near a yearly low after failing to rebound significantly on Monday.
- Markets are struggling to digest the OPEC report, which could be too optimistic on demand for 2025.
- The US Dollar Index is trading below 101.50 after Kamala Harris was declared victorious in the evening presidential debate.
Crude oil price is up nearly 1.5% and recovering above $66.80 on Wednesday. The positive trading day is very welcome for the hard-hit commodity, which at one point faced losses of nearly 10% in September and hit its lowest level since May 4, 2023, on Tuesday. The drop to $64.75 developed after the latest monthly report from the Organization of the Petroleum Exporting Countries (OPEC) on Tuesday showed that OPEC was very positive in its demand outlook and mentioned that only a reduction of a few thousand barrels per day would be enough to limit the supply glut and meet forecast demand.
The US Dollar Index (DXY), which tracks the performance of the US Dollar (USD) against a basket of currencies, is on the decline since Vice President Kamala Harris was labelled victorious in the late-night presidential debate against former US President Donald Trump. However, attention is shifting to the release of the US Consumer Price Index (CPI) for August. The number holds great significance, with markets still unsure whether to lock in a 25 or 50 basis point interest rate cut by the US Federal Reserve (Fed) next week.
At the time of writing, WTI crude oil is trading at $66.78 and Brent Crude at $70.47
Oil and Markets News: OPEC Report Seen as Too Optimistic
- The Energy Information Administration (EIA) also released its monthly oil outlook and saw U.S. demand stabilizing while markets will remain in deficit due to OPEC production cuts, Bloomberg reports.
- The American Petroleum Institute (API) reported a reduction of 2.79 million barrels in its recent crude oil inventory change on Tuesday. A small increase of 0.7 million was expected.
- At 14:30 GMT, the EIA will release its weekly change in crude oil inventories for the week ending September 6. An increase of 0.9 million barrels is expected after the previous reduction of 6.873 million barrels.
Oil Technical Analysis: Here Comes the Dead Cat Bounce
Crude oil has come under pressure after markets saw that the small demand cuts forecast by OPEC were not really in line with reality. Recent data reveals a global economic slowdown, with declining demand from the largest consumers: China and the US. With this disconnect between OPEC projections and economic reality, any upward movement is expected to be short-lived as long as current supply and demand imbalances persist.
There is a long road to recovery before breaking above $70 again. First is $66.91, which is now acting as resistance after losing its place as support. Once that level is reclaimed, $70.00 is back on the table with $71.20 as the first level to watch. Ultimately, a return to $75.27 is still possible, but it would come with a seismic shift or disruption to current equilibriums.
The next level below is $64.38, the low of March and May 2023. If that level faces a second test and is broken, $61.65 becomes a target, with $60.00 as a psychologically important figure just below, at least tempting to be tested.
WTI Crude Oil Daily Chart
Brent Crude FAQs
Brent crude oil is a type of crude oil found in the North Sea that is used as a benchmark for international oil prices. It is considered “light” and “sweet” due to its high gravity and low sulfur content, making it easy to refine into gasoline and other high-value products. Brent crude oil serves as a benchmark price for approximately two-thirds of the world’s internationally traded oil supplies. Its popularity is based on its availability and stability: the North Sea region has a well-established infrastructure for oil production and transportation, ensuring a reliable and steady supply.
Like all assets, supply and demand are the key drivers of the Brent crude oil price. As such, global growth can be a driver of higher demand and vice versa for weak global growth. Political instability, wars and sanctions can disrupt supply and affect prices. Decisions by OPEC, a group of major oil producing countries, are another key driver of price. The value of the US Dollar influences the Brent crude oil price as oil is predominantly traded in US Dollars, so a weaker US Dollar can make oil more affordable and vice versa.
Weekly oil inventory reports released by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of Brent crude oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories, it may indicate an increase in demand, which pushes up the price of oil. Higher inventories may reflect an increase in supply, which pushes down prices. The API report is released every Tuesday, and the EIA report the following day. Their results are usually similar, within 1% of each other 75% of the time. The EIA data is considered more reliable, as it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 13 oil-producing nations that collectively decide production quotas for member countries at semi-annual meetings. Their decisions often affect Brent crude oil prices. When OPEC decides to reduce quotas, it can restrict supply, driving up oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten additional non-OPEC members, the most notable of which is Russia.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
