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Oil steady as markets prepare for OPEC headlines ahead of weekend

  • WTI oil traders are preparing for this weekend’s OPEC ministers’ meeting.
  • The Dollar continues to weaken, which supports commodity prices.
  • Oil could recover to the $84 level if more and longer production cuts are announced at the next OPEC+ meeting.

Oil prices remain flat for now, although nervousness is taking over the commodity as OPEC headlines begin to pick up in volume. Although the next meeting is scheduled for November 26, it seems that rumors are spreading in the markets that Saudi Arabia could prolong and expand its production cut in volume and duration. Oil refiners are caught in the middle, with stockpiles rising, leading to lower demand, tighter margins and tighter supply.

Meanwhile, the dollar continues to reach two-month highs and is at a crucial moment for the price of the US Dollar Index (DXY). DXY price is crossing two very crucial technical moving averages, which means a more substantial drop could be coming. The Dollar could continue to fall, for example against the Euro (EUR/USD) to 1.1180, which would mean another 2.5% devaluation for the Dollar.

Crude oil (WTI) is trading at $77.54 per barrel and Brent at $82.05 per barrel at the time of writing.

Oil news and market movements: The OPEC drum

  • Italy has boosted its oil imports from the United States in September to the highest level in more than four years. The United States has increased its production to fill the gap caused by the ban on Russian supplies to the European bloc.
  • Russia has reduced its maritime crude oil exports to the lowest level since August this year. The cut comes to offset the recent rally in October, ahead of a meeting of OPEC ministers this weekend.
  • RBC Capital Mercados LLC reported that more and deeper cuts could occur at the next OPEC+ meeting, on November 26. The efforts this time would not come from Saudi Arabia alone, and would be a joint effort in order to share the burden, said RBC analyst Helima Croft.
  • Iranian Oil Minister Javad Owji stated that Iran’s oil production will increase to 3.6 million barrels in March next year and 4 million barrels per day the following year.
  • This Tuesday, the American Petroleum Institute will publish its weekly reserves figures. Previous data showed an accumulation of 1,335 million barrels, there are no forecasts for this week’s figure.

Oil Technical Analysis: OPEC needs to make a joint cut

Oil prices are poised to move as market expectations are skyrocketing for any type of production cut by OPEC. With OPEC+ ministers meeting this weekend, markets will be on the lookout for any additional action that could cement a floor in crude oil prices, which is proving challenging at the moment. The lingering Palestinian-Israeli situation remains an elephant in the room, especially following the hijacking of an oil tanker in the Strait of Hormuz by Iranian-backed Houthi rebels.

On the upside, $80.00 is the resistance to take into account. 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 of this decline, near $93.00, could come back into play.

To the downside, a soft 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.

US WTI Crude Oil: Daily Chart

WTI Crude Oil: Daily Chart

What is WTI Oil?

Frequently asked questions about WTI Oil

WTI crude oil is a type of crude oil sold in international markets. The acronym 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 reference 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 factor in prices. 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 1% drop 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

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