- WTI is trading near $75 as current events are not enough to send crude oil higher.
- The OPEC cuts are not enough and are nothing more than a drop on a hot plate.
- The Dollar Index fails again in its attempt to stay above important technical indicators.
Oil prices are going nowhere, despite the small rally near $75, showing that the current OPEC+ oil production cuts are simply not enough. Especially when Russia, which would take the brunt of the supply cuts, does not respect them and continues pumping even more crude oil to finance its war in Ukraine. Meanwhile, more trouble looms with markets readjusting for a lost year in 2024, with economic growth sluggish and central banks unwilling to abandon the high-rate regime anytime soon.
Meanwhile, the Dollar Index (DXY) is having another bearish day ahead of Thursday's European Central Bank (ECB) meeting. Markets are sending the US Dollar lower again with a tone of risk appetite present in the markets. In the middle of the European session, all European indices rise by more than 1%.
Crude oil (WTI) is trading at $74.21 per barrel, and Brent is trading at $78.93 per barrel at the time of writing.
Oil news and market movements: 2024 is already a lost cause for oil
- Since OPEC's November decision to implement production cuts for longer, crude oil prices have been unable to rise substantially and stay that way for longer.
- Energy traders are pointing to a lost year for 2024, with fewer profits, as the problems in the Red Sea are driving up the costs of transporting black fuel around the planet.
- The American Petroleum Institute (API) published a substantial reduction of 6.674 million barrels overnight on Tuesday, compared to a previous accumulation of 0.483 million barrels. A smaller reduction, of only 3 million barrels, was expected.
- This Wednesday, around 15:30 GMT, the Energy Information Administration (EIA) will publish weekly reserves. Previously, a decline of 2.492 million barrels was recorded and another decline of 2.15 million barrels is expected.
Technical Analysis of oil: OPEC loses control of oil markets
Oil prices are not having the expected return that OPEC, and especially Saudi Arabia, had projected. Oil prices, although close to $75, do not rise substantially. A failed result, then, of an even more failed meeting in November, in which, in the meantime, two African members have left OPEC, leaving the organization unable to change course to keep prices at profitable levels, even in a slowing economy.
On the bullish side, $74 continues to act as a line in the sand after a failed break above it on Friday. Although quite far away, $80 comes into play if tensions rise further. Once it breaks $80 it is the next upside target.
Below $74, $67 could be the next support for trading as it aligns with a June triple bottom. Should the triple bottom be broken, a new low at $64.35, the May-March 2023 low, could occur as the last line of defense. Although it is still quite far away, it is worth mentioning $57.45 as the next level to watch if prices fall sharply.
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US 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.
