- The sell-off in WTI oil persisted on Thursday, posting losses of 3% in two trading days.
- Oil broke below the critical level of $83.34 and is heading towards $80.63.
- The US Dollar Index fell below 106.00, after several central banks pressed against the strengthening of the Dollar.
Oil prices retreat further on Thursday, extending the decline triggered on Wednesday following a series of headlines from US President Joe Biden's administration about tariffs and sanctions. As for tariffs, Biden called for raising rates on Chinese steel and aluminum. As for sanctions, the US is about to reimpose sanctions on Venezuelan oil and gas, while Washington is considering adding sanctions on Iran's oil exports.
The US Dollar, for its part, is facing pressure from several central banks around the world that are seeing their currencies depreciate against the US Dollar. The strength of the US dollar is a problem for central banks as it curbs inflation. In Asia, there could even be coordinated intervention should the US Dollar Index (DXY) continue to rise, with Japan and South Korea willing to jointly intervene in the markets.
Crude oil (WTI) is trading at $81.80 and Brent at $86.44 at the time of writing.
Oil news and market movements: upcoming sanctions
- According to recent data, Iran is exporting the most oil in more than six years, the Financial Times reports.
- According to Li Ran, a researcher at the CNPC Economics and Technology Research Institute, China will have an oil production surplus of 82 million tons in 2030. This surplus would offset any shortfalls in OPEC and other supplier markets.
- Daan Struyven, a prominent Goldman Sachs analyst, sees $90 as a ceiling for Brent crude.
- The recent crude oil inventory report from the US Energy Information Administration (EIA) showed that Gulf Coast reserves are at their highest level in a year. US inventories grew by 2.74 million barrels, the highest level since June 2023.
Oil technical analysis: The drop is momentary, with tail risk in mind
Oil prices are not rising despite the Biden administration's current stance with sanctions imposed on Venezuela and to be issued for Iran, which should be supportive for oil prices. In terms of production, Iran is the third largest oil producer in OPEC and Venezuela the ninth. Sanctions on Iran could therefore have a greater impact on prices than those imposed on Venezuela, meaning the Biden administration will likely sanction non-oil sectors to avoid disruptions to global oil supplies.
With geopolitical tensions persisting, the $83.34 and $90 areas should remain within reach. A small barrier in the way is $89.64, the October 20 high. Should tensions intensify in the Middle East, it is possible that $94 could be reached, which could be a new 18-month high.
On the downside, $80.63 is the next candidate as a fundamental support level. Convergence with the 55-day and 200-day SMA at $79.88 and $79.57 should halt the decline.
WTI Crude Oil: Daily Chart
WTI Oil FAQ
What is WTI oil?
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.
What factors determine the price of WTI oil?
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.
How do inventories influence the price of WTI oil?
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.
How does OPEC influence the price of WTI oil?
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.
