Oil could extend losses as supply looks set for further buildup – Crypto News – Crypto News
Connect with us
WTI bears move in for fresh lows below critical weekly structure WTI bears move in for fresh lows below critical weekly structure

others

Oil could extend losses as supply looks set for further buildup – Crypto News

Published

2 years ago

on

Share:

 

  • WTI Oil trades near $74 in the aftermath of the OPEC+ meeting last week.
  • The US Dollar rallies as the rate differential between the US and other countries widens.
  • Oil could sink lower as supply increases once the US has restocked its Strategic Reserves (SPDR).

Oil prices are trading at a standstill near $74 in the aftermath of a disappointing OPEC+ outcome. The split division within the group of Oil producers was significant,  and the result was not what markets wanted to see in order to send Oil prices higher. Adding to that, the US is shoring up its Oil supply and buildup of its strategic stockpile, which means that once full even more oversupply will hit markets. 

Meanwhile, the US Dollar (USD) is rallying firmly for a second day in a row after China received a negative outlook from rating agency Moody’s and European Central Bank (ECB) board member Isabel Schnabel mentioned that inflation is near target and the ECB is at the end of its hiking cycle. This makes markets backtrack on the idea the US Federal Reserve would be the first to cut interest rates, supporting US yields and placing the US Dollar at higher value than the Euro and other currencies. 

Crude Oil (WTI) trades at $74.02 per barrel and Brent Oil trades at $78.77 per barrel at the time of writing. 

Oil news and market movers: OPEC+ lost the game for now

  • Saudi Energy Minister Prince Abdulaziz bin Salman said OPEC+ Oil production cuts can “absolutely” stay in place until March and beyond if needed, Bloomberg reported.
  • On the back of the comments from the Saudi Energy Minister, no real moves in Crude or Brent prices to take notice. 
  • Some strange moves in South Korea, where two processors bought 4 million barrels of US Oil up to now, for delivery in March, according to two traders who wanted to stay anonymous. 
  • This evening, the American Petroleum Institute (API) is due to release its weekly stockpile changes. The previous week recorded a small drawdown of 0.817 million barrels, with no forecast pencilled in for this week’s numbers. 

Oil Technical Analysis: OPEC trying to catch the ball 

Oil prices have been actually quite steady in the days after the OPEC+ official announcement. OPEC+ participants are starting to realise the missed opportunity and are trying to still salvage the situation with side comments such as those from the Saudi Energy Minister. These elements can be good for short blips, but they are unlikely to lead to substantial rallies or to  install a price floor on Oil prices. 

On the upside, $80.00 is the resistance to watch out for. Should crude be able to jump above that again, look for $84.00 (purple line) as the next level to see some selling pressure or profit taking. Should Oil prices be able to consolidate above there, the topside for this fall near $93.00 could come back into play.

On the downside, the soft floor near $74.00 is under pressure. This level is acting as the last line of defence before entering $70.00 and lower. Watch out for $67.00 with that triple bottom from June as the next support level to trade at. 

US WTI Crude Oil: Daily Chart

WTI Oil FAQs

WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of 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 via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.

Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.

The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.

OPEC (Organization of the Petroleum Exporting Countries) is a group of 13 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.

Related Topics:
Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Trending