- WTI oil is trading near $86 and looks likely to break above $88 again.
- The Dollar closed last week with another weekly rise, although the highs point to a pullback for the bulls.
- The price of oil could recover, although the threat of recent supply cuts being lifted is a threat to further gains.
Oil prices soared last week after the US imposed new sanctions on tankers carrying oil from Russia. Meanwhile, several banks and analysts were quick to warn that any further price rally and overheating could easily be cooled by a simple easing or lifting of recent supply cuts from Saudi Arabia and Russia. With excess production capacity unused, it is to be expected that this element will now function as a bearish signal for oil prices, whereas just a few weeks ago it acted as a catalyst for rising prices.
Meanwhile, the US Dollar’s recovery last week could leave traders and investors poorly positioned heading into this week. Headline inflation might have ticked up a bit, putting pressure on the market with rates shooting back to 52-week highs as a result. Even though the DXY Dollar Index made a weekly gain on Thursday and Friday, the dollar’s uncertain trading looks set to continue on Monday.
Crude oil (WTI) is trading at $86.02 per barrel, and Brent is trading at $89.42 per barrel at the time of writing.
Oil news and market drivers
- The risk in the oil market from the Gaza crisis remains extremely fragile. With US President Joe Biden’s possible visit to Israel, tensions could resurface, and the possibility of a proxy war remains.
- The recent buildup of crude oil reserves in the United States is far from enough to avoid a multi-year low and could put the supply chain across the country at risk.
- The amount of crude oil worldwide being loaded onto tankers parked for at least seven days has fallen to 74.71 million barrels as of October 13. This is the lowest figure since December.
- According to several analyst reports, there is currently a surplus of unused supply. If realized, any rise in crude oil prices could drop quickly and remain below $100 for an extended time.
Oil Technical Analysis: Gaza remains the key
Oil prices soared last week as the risk premium on the Israel-Gaza escalation increased as Israel positioned itself to begin its ground invasion in the region. Meanwhile, markets are struggling to push up oil prices as Saudi Arabia could easily cap oil prices with increased supply. At the moment, the oil market is in a delicate balance that could lead to sudden reactions depending on the headlines.
To the upside, the resistance level near $88 is the first level on the bulls’ radar. From there, the next level will be the yearly high at $94. In the event of a breakout to higher prices, WTI could target $97.11, the August 2022 high.
On the downside, traders are preparing to enter the area near $78. This area should have ample support for buying. If the oil price continues to fall below this level, a nosedive could occur, causing WTI prices to fall below $70.
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WTI 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.
