- Crude oil found support and stabilized from Thursday's weekly low of $69.15.
- Overnight API weekly numbers came with an unexpected drawdown.
- The US dollar index broke through a major level on its way to 104.00.
After a four-day losing streak, oil prices hit a bottom on Thursday and stabilized, but are still down nearly 7% for the week. The floor that is starting to form includes traders questioning whether Israeli Prime Minister Benjamin Netanyahu will keep his promise to the United States (US) not to attack Iranian oil facilities. Further support came from the American Petroleum Institute's (API) weekly statistics on overnight stockpiles, which showed an unexpected decline of 1.58 million barrels for the week ending October 11, compared to the expected 2.3 million barrels. .
The U.S. Dollar Index (DXY), which tracks the performance of the U.S. dollar against six other currencies, is bracing for volatile trading ahead. The European Central Bank (ECB) cut interest rates by 25 basis points (bp), but ECB President Lagarde said the downside risks to the eurozone were greater than the upside risks. Meanwhile, U.S. retail sales were strong at 0.4% versus the expected 0.3%, meaning U.S. consumers are still willing to spend and buy, indicating healthy domestic demand. It shows.
At the time of writing, Crude Oil (WTI) is trading at $70.00 and Brent Crude is trading at $74.02.
Oil news and market trends: EIA next
- China has announced plans to support its domestic housing market. The investment size will be 4 trillion yuan (CNY), but a message was conveyed earlier this week on Monday that it would be about 6 trillion yuan. According to Bloomberg, Asian markets did not react much to the decline in numbers.
- Pressure continues to mount on Israeli Prime Minister Benjamin Netanyahu to ignore US requests not to target Iranian oil facilities. Reuters reports that there is growing anxiety within the Cabinet after opposition leaders published an article in the Jerusalem Post on Tuesday calling for immediate attacks on Iranian facilities.
- The Energy Information Administration (EIA) will publish weekly stockpile changes for the week ending October 11th at 15:00 GMT. The forecast calls for a small stockpile of 2.3 million items, compared to 5.81 million items the previous week.
Oil technical analysis: stable despite all moving parts
Crude oil is struggling to maintain the $70.00 marker, but it won't be an easy task from here. Prolonged geopolitical tensions could cause oil prices to rise quickly, but the whole thing could quickly collapse if nothing happens. While several other asset classes are moving in markets hedging against former President Donald Trump's chances of winning the Nov. 5 U.S. presidential election, oil has no idea how to price in a Trump victory. It became clear that there was no clue.
Oil has a difficult road to recovery in the coming days. First, it needs to regain the all-important level of $71.46, which was strong enough to catch the falling knife on Monday, and above it at the daily close. Once out of there, the higher technical level at $75.28, which includes the 100-day simple moving average (SMA) and several important lines, will likely be the first major hurdle.
On the downside, the pivotal level of $71.46 mentioned earlier has turned into resistance and is no longer worth supporting. Instead, traders need to look further below $67.11, the level that supported the price in May-June 2023. If the stock falls below this level, the year-to-date low in 2024 will be $64.75, followed by the 2023 low of $64.38.
US WTI crude oil: daily chart
Frequently asked questions about WTI oil
WTI oil is a type of crude oil sold on the international market. WTI stands for West Texas Intermediate and is one of three main types including Brent and Dubai crude. WTI is also referred to as “light” and “sweet” due to its relatively low specific gravity and relatively low sulfur content, respectively. It is considered a high quality oil that is easy to refine. The product is sourced in the United States and distributed through the Cushing hub, considered the “pipeline crossroads of the world.” It is the oil market benchmark and the WTI price is frequently quoted in the media.
As with all assets, supply and demand are the main drivers of WTI oil prices. Therefore, global economic growth may be the driving force behind increased demand, and the converse is also true if global economic growth slows. Political instability, war, and sanctions can disrupt supply and affect prices. Decisions by OPEC, a group of major oil producing countries, are also a major factor in prices. Since oil is primarily traded in US dollars, the value of the US dollar affects the price of WTI crude oil. Therefore, when the US dollar weakens, oil becomes more affordable and vice versa.
The weekly oil inventory report published by the American Petroleum Institute (API) and the Energy Information Administration (EIA) influences the price of WTI oil. Changes in inventory reflect changes in demand and supply. If the data shows a decline in inventories, it could indicate an increase in demand, pushing up oil prices. Increasing inventories reflect increased supply and can push prices down. API reports are published every Tuesday, and EIA reports are published the following day. Typically, their results are similar and fall within 1% of each other 75% of the time. EIA data is considered more reliable because it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is an organization made up of 12 oil-producing countries, which meets twice a year to collectively decide on production quotas for member countries. Their decisions often influence WTI oil prices. If OPEC decides to cut production, supplies could tighten and oil prices could rise. If OPEC increases production, it will have the opposite effect. OPEC+ refers to an expanded group that includes 10 additional non-OPEC countries, the most notable of which is Russia.
