- The price of WTI oil is trading negative after a volatile session on Tuesday.
- The US dollar is trading in another universe after a substantial devaluation.
- The rise in oil prices has not yet occurred, while the overall downward trend is the most likely outcome.
Oil prices are negative just hours before the start of the American session this Wednesday, after crude oil briefly attempted to break $80.00 on Tuesday. Falling inflation numbers in the US shook markets and caused stocks and bond prices to soar substantially. Oil traders will be asking themselves this Thursday: If crude prices can’t recover after the Fed stops raising rates and overnight Chinese economic data points to a faster-than-expected recovery, what? it will?
Meanwhile, the US Dollar (USD) has suffered its largest intraday devaluation in more than 52 weeks. The DXY Dollar Index fell by more than 1.5% intraday. Now that the markets are convinced that the US Federal Reserve has stopped raising interest rates, demand in the economy should pick up from now on.
Crude oil (WTI) is trading at $77.86 per barrel, and Brent is trading at $82.04 per barrel at the time of writing.
Oil News and Market Drivers: The Risk of Biden and Xi News
- This Wednesday all eyes will be on San Francisco, where US President Joe Biden and Chinese President Xi Jinping meet.
- The US Department of Energy confirmed that it purchased about 1.2 million barrels from two companies to replenish the Strategic Petroleum Reserve.
- The day before, the American Petroleum Institute (API) revealed an inventory build of 1.3 million barrels last week.
- Around 15:30 GMT, the Energy Information Agency (EIA) will publish its weekly variation in Crude Oil Reserves. A reduction of 300,000 barrels is expected, while last week an accumulation of 740,000 barrels was recorded. Estimates vary between 1,700,000 and 13,500,000 barrels.
Technical Analysis of the oil price: Stagnation until the OPEC meeting in November
Oil prices are stagnant, and appear to have only limited upside potential. With the recent series of events in global markets, oil prices should already have risen close to $80.00 or more, according to traders, although markets prefer to focus on the current sluggish demand. It is expected that this situation of blockage will continue until OPEC+ meets at the end of November and can intervene to respond to this sluggish demand.
To the upside, the $80.00 level is the resistance to watch. Should crude oil rally again, the next level where we will see some selling pressure or profit taking will be $84.00 (purple line). If oil prices consolidate above this level, the top portion of this decline, near $93.00, could come back into play.
To the downside, a bottom is forming near $74.00. Level that is acting as the last line of defense before entering $70.00 and below. Once in that area, markets could factor in the risk of a surprise OPEC+ intervention to push oil prices back up.
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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.
