- WTI oil remains near $72 after a positive close on Tuesday.
- Overnight, the API recorded a sharp drop of more than 5 million barrels.
- The DXY Dollar Index remains above 102.00 as traders keep their powder dry ahead of Thursday's US inflation.
Oil prices are not moving despite having quite a few bullish elements to take into account this Wednesday. Last night's release from the American Petroleum Institute (API) revealed a massive 5.2 million barrel reduction from last week. Meanwhile, the US Energy Information Administration (EIA) has published a forecast that demand will exceed current oil supply in 2024 by approximately 120,000 barrels per day on average – and would grow substantially further if OPEC+ continues with production cuts.
Meanwhile, the Dollar Index (DXY), a key factor for oil valuation, remains at 102.00. The Dollar remains stable awaiting the main event of this week, the US Consumer Price Index (CPI) on Thursday. The data could turn the tables heading into 2024. A lower CPI would mean faster interest rate cuts by the US Federal Reserve and a weaker dollar (which is bullish for oil prices ).
At the same time, given that oil is a key component of inflation, and given that prices fell substantially in the second half of last year, this could help reduce inflationary pressures in the US.
Crude oil (WTI) is trading at $71.90 per barrel, and Brent is trading at $77.97 per barrel at the time of writing.
Oil News and Market Drivers: Demand Picks Up
- The US Energy Information Administration (EIA) published its forecasts for 2024. A shortage of 120,000 barrels per day can be expected, as long as OPEC+ does not add more production cuts.
- The report from the American Petroleum Institute (API) showed a firm reduction of 5.2 million barrels compared to last week. The figure was a surprise, especially when compared to that of distillates and gasoline, which registered substantial increases of 4.9 million barrels for gasoline and 6.9 million for distillates.
- Standard Chartered reported on Tuesday that oil prices are trading $10 below their fair value.
- The weekly release of the Energy Information Administration (EIA) will take place around 15:30 GMT. A new decline of 675,000 barrels is expected compared to 5.5 million barrels last week. Expectations for this week ranged between a reduction of 2.6 million barrels and an accumulation of 2.1 million barrels.
Technical Analysis of oil: Crude oil is not completely dead
Oil prices are not moving after the massive reduction reported overnight by the API. The main reason for this was that the sharp drop in barrels of crude oil was accompanied by large increases in both gasoline and distillates. If the EIA data reveals a decline on all fronts, an upward movement in oil prices is expected.
To the upside, $74 remains important, although the level has dropped a lot. Once surpassed, $80 comes into play. Still some way off, the $84 area is next on the upside, once oil sees a few daily closes above the $80 level.
Below $74, the $67 level could be the next support as it lines up with a June triple bottom. If the triple bottom is broken, the new low for 2023 could be $64.35, the low of May and March, 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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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.
