- Crude oil trading rises more than 1% on Thursday as traders watch the escalating conflict between Israel and Iran.
- Traders sent oil prices higher after Iran launched ballistic missiles at Israel in retaliation for the land incursion into Lebanon.
- The US Dollar Index is heading for its fourth consecutive day of gains.
Crude oil rises another 1% on Thursday as tensions in the Middle East remain high and despite the unexpected rise in US inventories. Traders are trying to assess what the next step could be in the confrontation between Israel and Iran, as be it a further escalation or a decrease in tensions. Meanwhile, the unexpected increase in US crude stockpiles on Wednesday was completely ignored by the markets.
The US Dollar Index (DXY), which tracks the performance of the dollar against six other currencies, is headed for its fourth consecutive day of gains and is testing the September high at 101.90. Another big batch of data will be released on Thursday, with particular importance for the Institute of Supply Management (ISM) numbers for the Services sector. Weekly jobless claims will also be closely watched in light of Friday’s nonfarm payrolls number.
At the time of writing, Crude Oil (WTI) is trading at $70.86 and Brent Crude at $74.71.
News about Oil and the markets: OPEC tries to save the situation
- OPEC has said via Twitter that a Wall Street Journal (WSJ) article published on October 2 – which mentioned that Saudi Arabia expected oil prices could fall to $50 per barrel if OPEC members did not maintain its production cuts – was “inaccurate and misleading.”
- Russia’s own data shows its crude production in September fell just below its monthly target under the OPEC+ deal, according to people familiar with the country’s Energy Ministry figures. Russia reportedly produced 8.97 million barrels per day last month, Reuters reports.
- The US Energy Information Administration (EIA) reported a surprise increase of 3.889 million barrels on Wednesday versus an expected reduction of 1.25 million barrels.
Technical Analysis of the oil price: You cannot buy the fall
Crude oil prices are encountering minor resistance at $71.46, a level that was also tested and rejected on September 24 and 25. Should the situation not escalate further in the Middle East, a rapid sell-off could occur due to this risk premium, with a possible drop back to $67.11.
At current levels, $71.46 remains the focus after a brief false breakout last week. If a supportive catalyst remains present, a return to $75.27 (January 12 high) could occur. On the way to that level, the 55-day SMA at $72.80 could slow the rally a bit. Once above $75.27, the first resistance to follow is $75.80, which aligns with the 100-day SMA.
On the downside, $67.11, a triple bottom in summer 2023, could continue to hold as support. If that is not the case, further down the next level is $64.38, the March-May 2023 low. Even $61.65 could come into play if a ceasefire occurs or if Israel signals that it is over with its special operation in Lebanon.
US WTI Crude Oil: Daily Chart
WTI Oil FAQs
WTI oil is a type of crude oil that is sold in international markets. WTI stands for West Texas Intermediate, one of the three main types that include Brent and Dubai crude. WTI is also known as “light” and “sweet” for 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 through the Cushing facility, considered “the pipeline junction of the world.” It is a benchmark for the oil market and the price of WTI is frequently quoted in the media.
Like all assets, supply and demand are the main factors that determine the price of WTI oil. As such, global growth can be a driver of increased demand and vice versa in the case of weak global growth. Political instability, wars and sanctions can alter supply and impact prices. The decisions of OPEC, a group of large oil-producing countries, is another key price factor. The value of the US Dollar influences the price of WTI crude oil, as oil is primarily traded in US dollars, so a weaker Dollar can make oil more affordable and vice versa.
Weekly oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) influence the price of WTI oil. Changes in inventories reflect the fluctuation of supply and demand. If the data shows a decline in inventories, it may indicate an increase in demand, which would drive up the price of oil. An increase in inventories can reflect an increase in supply, which drives down prices. The API report is published every Tuesday and the EIA report the next day. Their results are usually similar, with a difference of 1% between them 75% of the time. 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 that collectively decide member countries’ production quotas at biannual meetings. Their decisions often influence WTI oil prices. When OPEC decides to reduce quotas, it can restrict supply and drive up oil prices. When OPEC increases production, the opposite effect occurs. OPEC+ is an expanded group that includes ten other non-OPEC member countries, including 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.
