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Oil resides in the red this Thursday with traders bracing for another surprise build in US stockpile

  • WTI Oil drops back below $74, under important support.
  • API overnight print was double the previous build. 
  • The DXY US Dollar Index sells off further and snaps below 101.

Oil prices are dropping near 1% during European trading hours on Thursday. The slide comes on the back of another build in US Stockpile numbers published overnight from the American Petroleum Institute (API). With a build of 1.837 million barrels against 0.939 million last week, the US seems to be plumbing Black Gold at an elevated pace. 

The US Dollar (USD) gapped lower this Thursday at the start of the Asian session and is still sliding lower. With that move, the US Dollar Index (DXY) snaps below 101 and is on its way to 100. As long as US yields do not stop falling, the Greenback looks to be hanging in the ropes – normally a positive for Oil but not today. 

Crude Oil (WTI) trades at $73.42 per barrel, and Brent Oil trades at $78.65 per barrel at the time of writing. 

Oil News and Market Movers: Traders brace for EIA numbers

  • Overnight Crude Stockpile publication from the American Petroleum Institute (API) was a surprise build of 1.837 million barrels against 0.939 million last week.
  • This evening near 15:30 GMT the Energy Information Administration (EIA) will release its number of barrels. Previous was a build of 2.909 million, with a drawdown of 2.704 million expected. 
  • QatarEnergy has signed a supply agreement with Shell International in Singapore to supply 18 million barrels per year of Qatari Crude as of 2024.
  • Refiners in India are triggering a boost in supplies from the Middle East and other nearby countries. Recent attacks on ships in the Red Sea raises the risk of longer shipping time and higher costs, which puts margins of Indian refiners under pressure.
  • Options are starting to flatten in WTI Crude and are pointing to a less bearish outlook for the oil market in the coming months, away from its most bearish outlook mid-November. 

Oil Technical Analysis: Range trade found

Oil prices are erasing gains from Wednesday and slipping below $74. The recent API numbers are showing that the US is trying to counterbalance any sudden blip in demand by relentlessly pumping Oil and dumping it on the market, in order to keep Oil prices muted. Outstanding question at the moment is of course how long this tug-of-war between the US and OPEC+ can continue. 

On the upside, $74 is still holding some importance, although the level has become very chopped up. Once back above there, $80 comes into the picture. Although still far off, $84 is next on the topside once Oil sees a few daily closes above the $80 level. 

Below $74, the $67 level could still come into play as the next support level to trade at as it aligns with a triple bottom from June. Should that triple bottom break, a new low for 2023 could be close at $64.35 – the low of May and March – as the last line of defence. Although still quite far off, $57.45 is worth mentioning as the next level to keep an eye on if prices fall sharply. 

US WTI Crude Oil: Daily Chart

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.

Author

Filip Lagaart

Filip Lagaart is a former sales/trader with over 15 years of financial markets expertise under its belt.

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