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- Oil prices are headed for a second straight week of gains despite facing a bit of profit-taking on Friday.
- Traders see a rosy outlook for US demand in the short term while inventories fell more than expected last week.
- The US Dollar Index is trading solidly above the 105.50 level, helped by the Japanese Yen and Euro.
Oil prices It pulled back slightly on Friday but looks set to close in the green for the second week in a row, adding more than 7% to gains in two weeks. The decline in US inventories, coupled with the US Southern Belt preparing to receive the first tropical storms, could mean some supply disruptions in the short term.
at the same time, US dollar index (DXY), which tracks the performance of the US dollar against six major currencies, is comfortably higher in the upper 105.00 region, near 106.00. The move began overnight when Nvidia (NVDA) ripped off $91 billion in market cap in just one trading session, sparking a massive move towards the safe-haven US dollar. European Purchasing Managers’ Index (PMI) figures on Friday indicated Euro-zone The economy is losing momentum ahead of the release of US PMIs later on Friday.
At the time of writing, WTI was trading at $81.05 and Brent at $84.82.
Oil News and Market Movers: Texas is set for turmoil
- The U.S. Energy Information Administration said Thursday that crude oil inventories fell by more than 2.5 million barrels this week, more than the expected decline of 2 million barrels, sending crude oil prices above the $80.00 level, Bloomberg reported.
- Due to inclement weather, the Corpus Christi region of Texas has suspended most oil exploration and export activities. Mexico will also close some fuel import terminals, according to Reuters.
- Mexican state oil company Pemex will begin processing crude oil at its Dos Bocas refinery in the second half of 2024, Reuters reported.
- Baker Hughes US oil rig count will start to gain importance as a number as hurricane season begins. This week’s figure will be released at 17:00 GMT, with the previous figure at 488.
Oil technical analysis: short squeeze
Oil prices managed to jump above the key level, reaching the $81.00 level. It will be important from here to first see whether crude oil is able to withstand profit taking and manage daily and weekly closes above this level. When this is the case, further upside could occur towards the 2024 high at $87.12.
On the upside, the red bearish trend line was broken near $81.00 and now needs to prove its resilience as support with daily and weekly closes above it. There is more room to move up towards $87.12, the highest level since the beginning of the year (April 5). Previously, the relatively small pivot level served as resistance near the $84.00 level.
On the downside, the large belt of the simple moving averages (SMA) should now act as support and no longer allow for movements below it to be seen. This means that the 55-day SMA at $79.79, the 100-day SMA at $79.47, and the 200-day SMA at $78.99 should avoid any declines below 79.00. USD. If these levels do not hold, another drop to $75 is possible.
US West Texas Intermediate crude oil: daily chart
Frequently asked questions about West Texas Intermediate crude oil
West Texas Intermediate oil is a type of crude oil that is sold in international markets. WTI stands for WTI, 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 gravity and sulfur content, respectively. It is considered a high quality oil and easy to refine. It is sourced from the United States and distributed through the Cushing Hub, considered the “pipeline crossroads of the world.” It is a benchmark for the oil market and the price of WTI is frequently quoted in the media.
Like all assets, supply and demand are the main drivers of the price of WTI. 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 affect prices. Decisions by OPEC, a group of major oil-producing countries, are another major driver of the price. The value of the US dollar affects the price of WTI, as oil is mostly traded in US dollars, so a weak US dollar can make oil more affordable and vice versa.
Weekly oil inventory reports from the American Petroleum Institute (API) and the Energy Information Agency (EIA) influence the price of WTI. Changes in inventories reflect fluctuations in supply and demand. If data shows a decline in inventories, this could indicate increased demand, leading to higher oil prices. High inventories can reflect increased supply, causing prices to fall. The API report is published every Tuesday and the EIA report the next day. Their results are usually similar, falling within 1% of each other 75% of the time. EIA data is more reliable, because it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 13 oil-producing countries that collectively decides production quotas for member countries at meetings held twice a year. Their decisions often affect WTI prices. When OPEC decides to cut its quotas, it can tighten supply, causing oil prices to rise. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten additional members from outside OPEC, most notably Russia.
