Oil breaks new yearly high before falling flat this Monday
- Oil (WTI) prints new yearly high before paring back losses.
- The US Dollar is in wait-and-see mode ahead of the US Fed rate decision.
- Crude prices will be driven by headline risk from the Energy minister of Saudi Arabia.
Oil prices are on a volatile trading regime on Monday after making a new yearly high, as traders brace for any comments from the Saudi Arabian minister of energy and oil that could further put pressure on the commodity. Crude prices already saw a big push higher earlier this month on the back of surprise comments from Russia and Saudi Arabia, which outlined plans to extend any production cuts until the end of the year. The question is if Saudi Arabia will do more.
Meanwhile, the US Dollar is facing a tough week with a very calm calendar until Wednesday. That day, the US Federal Reserve (Fed) will take a decision on interest rates and markets expect policymakers to leave interest rates unchanged. . In this context, the Greenback is expected to stay afloat until Fed Chair Jerome Powell delivers his speech after the decision.
Crude Oil (WTI) price trades at $90.828 per barrel and Brent Oil at $94.00 at the time of writing.
Oil news and market movers
- Russia is holding suprise drills to protect North Sea Route.
- Sanctioned Iran oil funds are said to be transferred to Qatar.
- Saudi Arabia crude exports fell by 0.792 million barrels per day in July.
- Russian Oil could fall into grace as US diesel producers are falling short of supply.
- Saudi Energy Minister Prince Abdulaziz bin Salman will address an industry conference later Monday.
- Hedge funds boosted their price outlook on Brent and Crude to a 15-month high last week.
- Diesel and gasoline prices at the pumps are rising quickly both in the US and Europe, fueling concerns over renewed energy inflation.
- The supply deficit might grow even larger should demand start to pick up from China, as recent macroeconomic data suggests.
- Kazakhstan raised its daily Oil and Gas condensate production by 10% on Sunday from Saturday to 250,400 tons, according to data from the country’s Energy Ministry.
Oil Technical Analysis: peaked
Oil prices are in a very thin equilibrium in which any hiccup in supply could trigger another price breakout to the upside in Oil futures. Although the Relative Strength Index (RSI) is in deeply overbought territory, the newsflow and possible drawdowns in US stockpiles could eke out that last touch of more gains. Still, a quick jump up to $93.12 isn’t expected as a bigger catalyst would be needed to cause such a big move.
On the upside, the double top from October-November last year at $93.12 is the level to beat. Although this looks very much in reach, do not forget markets have already priced in a lot of possible supply deficits and plenty of bullish outlooks. Should $93.12 be taken out, look for $97.11, the high of August 2022.
On the downside, a pivotal level is at $84.30 from August 10. In case this level does not hold, a substantial nosedive might occur. In such a case, Oil prices might drop to a key floor near $78.00.
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WTI US OIL daily chart
Brent Crude Oil FAQs
What is Brent Crude Oil?
Brent Crude Oil is a type of Crude Oil found in the North Sea that is used as a benchmark for international Oil prices. It is considered ‘light’ and ‘sweet’ because of its high gravity and low sulfur content, making it easier to refine into gasoline and other high-value products. Brent Crude Oil serves as a reference price for approximately two-thirds of the world's internationally traded Oil supplies. Its popularity rests on its availability and stability: the North Sea region has well-established infrastructure for Oil production and transportation, ensuring a reliable and consistent supply.
What factors drive the price of Brent Crude Oil
Like all assets supply and demand are the key drivers of Brent Crude 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 Brent 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 Brent Crude Oil
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of Brent Crude 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 Brent Crude 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 Brent Crude 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.
Author
Filip Lagaart
FXStreet
Filip Lagaart is a former sales/trader with over 15 years of financial markets expertise under its belt.
