- Oil (WTI) remains near $83.80, falling for the fifth consecutive day.
- Dollar volatility skyrockets with two consecutive intraday movements of 1% in the Dollar Index, which remains flat for the week.
- Oil is at risk of falling to $80 as markets struggle to identify a bottom.
Oil prices are finding some support ahead of the weekly Energy Information Administration (EIA) figures, with losses already down 8% from their peak on October 20, as diplomacy rules in the escalation of tensions between Israel and Palestine. Several Heads of State meet to achieve further progress on the humanitarian front in Gaza. With the retreat of the Israeli ground offensive in the region, the risk of a broad proxy war in the Middle East is decreasing day by day, which means greater selling pressure on oil prices.
Meanwhile, the US Dollar (USD) achieved an astonishing performance on Tuesday and looks to consolidate these gains this Wednesday. The Dollar Index came close to reaching a new high for this trading week, although it failed to do so after the US closing bell. The dollar is expected to move within a fairly tight range this Wednesday, ahead of the European Central Bank meeting and US Gross Domestic Product figures on Thursday.
Crude oil (WTI) is trading at $83.44 per barrel, and Brent is trading at $87.22 per barrel at the time of writing.
Oil news and market movements
- Oil experts have warned that any risks related to Israel or Palestine could convince OPEC+ to relax its production restrictions.
- There is a divergence between oil prices in the US and Canada, as Canadian oil prices are weakening despite bottlenecks in Canada’s pipelines, which restrict shipments to refineries. Canadian pipelines have been forced to ration space this year amid rising oil production.
- The American Petroleum Institute (API) released its weekly figures overnight on Tuesday. The previous figure was a reduction of 4,383 million, and the real figure was 2,668 million barrels.
- At 14:30 GMT, the Energy Information Agency (EIA) will publish its weekly values ​​figures. The previous figure was 4,383 million barrels. Expectations for this week are between a reduction of 3 million and an accumulation of 2 million. If the accumulation exceeds 2 million barrels, crude oil prices will fall again.
- Russia is struggling to increase its oil exports as its exports of petroleum products fell to their lowest level in more than three years. Diesel exports fell to 769,000 barrels a day this month.
Technical Analysis of oil: A temporary bottom
Oil prices retreat further from their highs as the Israeli ground offensive recedes. However, there were other signs that could serve as an omen that crude oil prices were going to decline. Every time various banks start raising their forecasts towards $150 a barrel, the opposite often happens, as speculators become too greedy and large sellers are more than happy to cash in at high levels, while global demand fades and an oversupply looms.
To the upside, $84.25 is the new resistance. Should crude oil perform similarly to the Dollar Index on Tuesday, an even faster rise to $88 is expected. If oil prices manage to consolidate above this area, the $93 level could come back into play.
On the bearish side, traders are preparing for the entry into the area near $78. The area should have ample support for buying. A further decline below this level could lead to a tailspin, causing oil prices to sink below $70.
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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, 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 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.
