Oil set to end the day unchanged with tit for tat ramping up between Israel and Iran
- WTI Oil sell-off gets nearly fully erased at the start of the US trading session.
- Oil prices earlier broke below the pivotal $83.34 level, heading abck to $82.00
- The US Dollar Index pops back above 106.00 on upbeat Jobless Claims data.
Oil prices are erasing earlier losses after harsh rhetoric from Iran which said it is ready to respond when Israel should retaliate. More specific, Iran vowed to target several nuclear sites in Israel, which would mean substantial damage on the ground and in the region. Tensions and tit-for-tat headlines are spiraling yet again out of control, and the added sanctions from the US on Venezuela, Iran, and tariffs on China steel and aluminium are further driving up uncertainy and geopolitical tail risk.
The US Dollar, meanwhile, is having a change of heart as well, turning back in the green after yet again upbeat US data and beat on estimates across the board. Overnight several central banks had issued concerns on the strong US Dollar. In Asia the Bank of Japan and the Bank of South Korea even took it a step further and issued a joint statement saying that the strong US Dollar is messing with their measures to tackle inflation, and a joint invertention might be needed in order to limit the inflation inflow for their depreciating local currency against the Greenback.
Crude Oil (WTI) trades at $82.13 and Brent Crude at $86.56 at the time of writing.
Oil news and market movers: Headline risk remains live
- Recent data shows that Iran is exporting the highest amount of Oil in more than six years, the Financial Times reports.
- China is set to have a surplus of Oil production, expanding to 82m tons by 2030, according to Li Ran, a researcher at CNPC’s Economics & Technology Research Institute. This surplus would make up for any shortfall in the markets from OPEC and other suppliers.
- Leading Goldman Sachs Analyst Daan Struyven sees $90 as a ceiling for Brent Crude.
- The recent Crude Oil Inventories report from the US Energy Information Administration (EIA) showed that the Gulf Coast stockpiles are at their highest level in a year. Us Inventories grew by 2.74 million barrels, the highest since June 2023.
Oil Technical Analysis: Domino’s wobble
Oil prices are not rallying despite the current stance from the Biden administration with sanctions being slapped on Venezuela and are set to be issued for Iran, which should be rather supportive for Oil prices. On the production front, Iran is number 3 and Venezuela is number 9 on oil production volumes within OPEC. Sanctions on Iran thus might be having a heavier impact on prices than the ones for Venezuela, which means the Biden administration will probably sanction non-oil sectors in order to avoid disruptions in the global Oil supply.
With geopolitical tensions lingering, the $83.34 and $90 handle should remain in grasp. One small barrier in the way is $89.64, the peak from October 20. In case of further escalating tensions in the Middle East, expect even $94 to become a possibility, and a fresh 18-month high could be on the cards.
On the downside, $80.63 is the next candidate as a pivotal supportive level. A touch softer, the convergence with the 55-day and the 200-day Simple Moving Averages (SMAs) at $79.88 and $79.57 should halt any further downturn.
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.