- Oil (WTI) is steady at $84 after a quiet trading session on Tuesday.
- The dollar weakened following comments from Fed officials about the end of the monetary tightening cycle.
- A lateral movement downwards in prices is expected, as several oil-producing countries vowed for diplomacy amid the current tensions in Gaza.
Oil prices have quickly put to rest Monday’s volatility following the outbreak of violence in Israel and the Gaza Strip over the weekend. Markets were on edge over potential spillover effects from the conflict to the broader Middle East region, but roughly 48 hours later it appears oil production is not at risk.
Meanwhile, the US Dollar (USD) sees markets look beyond the recent events in Israel and Gaza. It seems that several countries and participants in this war do not want to see a further escalation of violence. This means that, for now, a proxy war is out of the way. Haven flows begin to slow, with the Swiss Franc and Dollar retreating to weaker levels.
Crude oil (WTI) is trading at $84.24 per barrel, and Brent is trading at $86.81 per barrel at the time of writing.
Oil and markets news
- Two major European oil refiners ordered less crude than usual from the Saudi company Aramco after it raised its prices for supplies to Europe.
- Russia and Saudi Arabia will discuss oil market prices on Wednesday, according to Russian Deputy Prime Minister Alexander Novak.
- Saudi Energy Minister Prince Abdulaziz bin Salman will participate in the Russian Energy Week forum. The Saudi Energy Minister will meet Deputy Prime Minister Novak in an informal meeting during the convention.
- The United States and Venezuela are close to reaching an agreement that would soften oil and banking sanctions in exchange for guaranteeing fair elections next year.
- With recent cuts since the end of summer, OPEC+ countries have ample excess production capacity to deal with sudden supply crises.
- The American Petroleum Institute will publish its weekly figures at 20:30 GMT. The previous week a reduction of 4.21 million barrels was recorded.
Oil Technical Analysis: Stable waiting for the next catalyst
Oil prices remain stable and trade sideways around Monday’s highs in the initial reaction to the war in Israel and Gaza. For the moment, price developments appear to be supported by a small risk premium, although the current diplomatic stance of several countries in the region has greatly reduced the tension surrounding a possible rise in the price of oil. Sideways price behavior is to be expected, with a possible drop once the conflict calms down.
On the upside, last year’s October and November double top at $93.12 remains the level to beat. Although it was surpassed on Thursday, the price of oil did not close above it. If $93.12 is exceeded, we will have to look for $97.11, the August 2022 high.
On the downside, traders are preparing for entry into the area near $78. There should be ample support for buying in this area. Continuing to fall below this level could lead to a nosedive, causing oil prices to fall below $70.
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US 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, which 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 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 the production quotas of member countries 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.
