Oil off session's high after OPEC report publication showing dispersed cuts
|- WTI Oil tests the double top which could mean more upside.
- Oil traders are reluctant to send oil higher on the back of a mixed OPEC report.
- The US Dollar Index is stronger ahead of US CPI numbers.
Oil prices are retreating a touch, off this Tuesday's highs, in the aftermath of the publication of the monthly OPEC report. The report reveals dispersion and non-compliance yet again among OPEC members on the supply cuts that were agreed upon at the end of 2023. Biggest group member that is non-compliant is Iraq which is reluctant to adhere the proposed amount of production cuts, while other members such as Kuwait and Algeria have promptly held up their end of the bargain.
Meanwhile, the US Dollar Index (DXY) is in the green, after a red hot inflation report. The US Consumper Price Index (CPI) rose above estimates on both the Core and Headline inflation for both the Monthly and Yearly benchmarks. This gives the Greenback wings with rallies in the US Dollar against most major peers with rate cuts for March off the table and even June looking questionable.
Crude Oil (WTI) trades at $77.34 per barrel, and Brent Oil trades at $82.24 per barrel at the time of writing.
Oil news and market movers: OPEC report still showing division
- Recent monthly OPEC reports shows Iraq only has cut around 98,000 barrels per day of production, while rather 300,000 was needed from the nation. This creates an imbalance in the oil markets, which are already flooded with US oil.
- OPEC will stay proactive and united, the Secretary General of the OPEC group Haitham Al Ghais said this morning at the World Governments’ Summit. A robust oil demand is materializing.
- Fatih Birol, Executive Director of the International Energy Agency (IEA) said that OPEC+ is showing largely good discipline in its supply cuts. Further, the IEA sees global demand growing by 1.2 to 1.3 million barrels per day in 2024.
- Saudi Aramco is still looking into adding supply output and said it is ready to raise its capacity should the government ask for it.
- The US administration has sanctioned around 25 tankers (out of the 50) from carrying Russian Oil. These are currently either afloat at sea without any cargo or are harboured without any travel papers or plans being admitted at the moment.
Oil Technical Analysis: A floor might be in, but more upside not
Oil prices have staged a very solid rally these past six days with a nice consecutive winning streak. The end of the line could be near with prices currently banging on the $77 marker which falls in line with both a descending trend line, the 100-day and the 200-day Simple Moving Average just a few cents apart from each other. Should more positive, supportive or outright bullish news for Oil emerge, a quick sprint to $80 could be underway.
As mentioned above, $80 is the first level to have a look at on the upside. Should the Relative Strength Index not head into being overbought too quickly, look for $84 and $88 as next targets to the upside. The ultimate target in this area would be $92.66, with the tops from November 2022 coming into play.
On the downside, support from the 55-day SMA at 73.52 should goto work before the green ascending trend line near $72.10 gets tested. If that trend line snaps, look for the purple line near $67.11 to catch any falling knives. Seeing the triple bottom from June/July 2023, that level should be strong enough to support.
US WTI Crude Oil: Daily Chart
WTI Oil FAQs
What is WTI Oil?
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.
What factors drive the price of WTI Oil?
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.
How does inventory data impact the price of WTI Oil
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.
How does OPEC influence the price of WTI Oil?
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.
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