Oil picks up as lower US inflation triggers turnaround


  • WTI Oil trades in the green for this week and adds positive numbers for Tuesday. 
  • The US Dollar devalues near 1% in the CPI aftermath. 
  • Oil could recover further although a full recovery does not look possible without a substantial catalyst. 

Oil prices are ticking up again after earlier being on the downside, caused by the publication of the International Energy Agency (IEA) this Tuesday, a contradiction from Monday's events. The uptick on Monday was mainly contributed to the OPEC+ monthly report with its bullish outlook, though still it needs more upside for Crude to continue its recovery. A substantial catalyst is needed, which is not expected until the end of November when OPEC+ convenes to issue their 2024 first half year forecast with the possibility of more supply cuts ahead. 

Meanwhile, The US Dollar (USD) is nosediving as the recent US Consumer Price Index (CPI) declined in all segments, both Core and Headline. This convinced traders that the Fed is now fully done hiking, and even puts quicker cuts on the forefront. Crude prices are jumping higher on the back of this reversal and a weaker US Dollar triggering an uptick in the black fuel. 

Crude Oil (WTI) trades at $78.74 per barrel, and Brent Oil trades at $82.87 per barrel at the time of writing. 

Oil news and market movers: markets send crude soaring as CPI drops

  • A substantial drop in both Core and Headline inflation for both the monthly and yearly performance is sending Crude higher in a side effect of a weaker US Dollar. 
  • A Bloomberg Intelligence Report reveals that Crude prices could sink to $40 as a correlation with the Russel 2000 Index and the S&P 500 would mean a weaker Crude price as outcome. 
  • With the decline in global crude prices, Russian revenues have been easing alongside in October, from their previous peak. The country only received $18.34 billion, which was $25 million lower than September.
  • Speculators remain bearish on the Oil outlook in the short term as no additional measures are expected from OPEC ahead of the November meeting on the 26th and sluggish demand from Europe and the US keeps demand on the low end against historic data. 
  • The spread between bid and ask in North Sea crude has fallen to the lowest spread in 15 months. Narrowing refining margins and the end of maintenance outages is the main reason, the International Energy Agency (IEA) reports.
  • More headlines from the IEA this Tuesday morning with comments that point out that the Oil market is less tight than expected as supply is building and a deficit into year-end is at hand with a surplus in early 2024 at current pace. 
  • Around 21:30 GMT the American Petroleum Institute (API) is due to release its weekly Crude Stockpile Change. Previous data showed a build of 11.9 million barrels. 

Oil Technical Analysis: IEA sees more bearish outlook

Oil prices are trying to recover, though that will be very difficult as no substantial catalyst is present to provide a counter argument against the sluggish demand from China, Europe and the United States. All eyes then point to OPEC+ which can steer the supply side into lower volumes and create a shortage in the markets which would ramp Oil prices back up. Though for now, oil prices will probably decline towards the end of November when OPEC+ will likely finally try to act, issuing new measures to jack them back up. 

On the upside, $80 is the new resistance to watch out for. Should Crude be able to jump higher again, look for $84 (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 could come back into play.

On the downside, traders are seeing a soft floor being formed near $74. That level is acting as the last line of defence before entering $70 and lower. Once entering that area, markets might factor in the risk of a surprise intervention from OPEC+ to jack up Oil prices again. 

 

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.

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