- Oil jumps into the green with a double headline in favor of a rebound in crude oil.
- WTI oil rose above $82, having tested the $80.63 level on Monday.
- The US Dollar Index fell below 106.00 following the release of French, German and Eurozone services PMIs.
Oil prices are recovering from Monday's small drop, which saw crude oil approach a key level on the daily chart. Tuesday's rise is due to the fact that US sanctions against Iran will come into force next week, which will once again increase tensions. The second element of support comes from a setback in talks between Iraq and Turkey on the resumption of oil flows from the fields of Iraqi Kurdistan, which require more talks to get the pipeline back into operation after more than a year closed.
The US Dollar Index (DXY), which tracks the value of the Dollar against the six major currencies, faces a pullback and falls below 106.00 on Tuesday. Its largest contributor, the Euro, which represents 57.6% of the basket, goes against the Dollar. The Euro rose after the surprise of the services Purchasing Managers' Index (PMI) data from France, Germany and the Eurozone in April. Although the manufacturing sector continues to contract, the markets ignored this fact and the Euro rose thanks to the good data from the services sector.
Crude oil (WTI) is trading at $82.27 and Brent at $86.73 at the time of writing.
Movements in the markets: Iraq's oil flows again
- The reopening of the Iraq-Türkiye pipeline would add 500,000 barrels a day to the market. Turkey has already signaled that it is open and ready to receive the flow after it had to stop the pipeline from leaving due to the February 2023 earthquakes, Bloomberg reported.
- According to Jim Lucier of Capital Alpha Partners, sanctions on Iran are expected to have a moderate impact on oil prices. Lucier noted that US President Joe Biden will not want to risk a further rise in oil prices, which could trigger another spike in inflation and could jeopardize his re-election chances in the upcoming US elections in November.
- At 20:30 GMT, the American Petroleum Institute (API) will publish weekly changes in crude oil stocks for the week ending April 19, which is expected to rise by 1.8 million from a build of 4. 09 million barrels observed the previous week.
Oil Technical Analysis: Upward Rebound
Oil prices are trading in the green on Tuesday as markets remain solidly balanced following easing tensions in the Middle East. However, current price developments remain fragile due to US sanctions that will come into force next week. Although they are not directed against Iranian oil, they could lead to a reorientation of Iranian oil towards other customers and away from the US and Europe. The Middle East therefore remains at risk, which will require a persistent premium in oil price developments for quite some time.
With geopolitical tensions lingering, the November 3 high at $83.34 and the $90 area should remain as upside resistance. A small barrier in the way is $89.64, the October 20 peak. Should tensions continue to rise, one can expect even the September high at $94 to become a possibility and a new 18-month high to be reached.
On the downside, the October 6 low at $80.63 is the next candidate as a key support level. Below, the 55-day and 200-day simple moving averages at $80.37 and $79.67 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.
