- WTI Oil near $70 on Tuesday on reports a Red Sea tanker was attacked by Houthi rebels.
- Oil outlook looks bleak for 2024 as oversupply is too big to get matched anytime soon.
- The US Dollar (Index) weaker ahead of US Inflation and Fed’s last meeting for 2023.
Oil prices are retreating despite an uptick in geopolitical tensions with reports a Red Sea tanker was seized by Houthi rebels after a missile attack. Though, the heightened risk and threat in the region is just a small counterweight against the massive oversupply in the Oil markets. With OPEC+ still remaining unable to put in place fix and firm supply restrictions, the Oil faucet is wide open and is dumping far more Oil than needed into global markets.
Meanwhile, the US Dollar (USD) is easing and is retreating below 104 in the US Dollar Index (DXY). The easing comes with traders bracing for another decline in US inflation, which will be printed later this Tuesday. The number comes ahead of the last Federal Reserve meeting for 2023 which will take place on Wednesday.
Crude Oil (WTI) trades at $71.06 per barrel and Brent Oil trades at $75.63 per barrel at the time of writing.
Oil news and market movers: Even geopolitics don’t work
- ABC reports Houthi rebels out of Yemen have attacked a Red Sea tanker in the region.
- Several banks are or have issued their forecasts for 2024, and the economic outlook looks very bleak with lower growth across the board. This means less demand for Oil to come even further in 2024.
- Despite the small uptick on the back of geopolitical tensions flaring up this Tuesday, Brent crude still resides near a five-month-low.
- The American Petroleum Institute (API) is due to release its weekly stockpile change at 21:30 GMT. Previous number was for a build of 594,000 barrels. No forecast pencilled in.
Oil Technical Analysis: Year-end dry up
Oil prices are seeing more dark clouds being formed for its performance in the coming weeks and months. Several banks are issuing warnings on global growth concerns, which is of course correlated with the demand for Oil. With these negative bearish outlooks and the current surplus buildup, a return to $90 for Crude looks to be out of the question for some time in case no other events take place that might trigger a supply issue.
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 got broken and is gone. Now, $70.00 is trying to salvage the situation, though it has been breached already on Thursday and Wednesday. Watch out for $67.00, which aligns with a 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.