Oil jumps as US economy steams on with demand for oil expected to grow
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- WTI Oil trades near $70 and briefly broke below it on Wednesday and Thursday.
- Oil outlook supports more downside as recent API and EIA data revealed substantial exports from the US
- The US Dollar (Index) jumps back above 104 in reaction to an positive US Jobs Report.
Oil prices are daring to advance a touch this Friday after the release of the most recent US Jobs Report. Although the Nonfarm Payroll number was roughly within the benchmark of estimates, printing 199,000 above 183,000 forecasted. It is the unemployment rate decline from 3.9% to 3.7% which is taking away all the attention, and which commodity traders now see as a possible pick up in demand for energy in the coming quarter.
Meanwhile, the US Dollar (USD) jumps and breaks back above 104. It goes without saying of course that the stronger US Dollar is a result of markets paring back bets on quick and swift cuts from the US Federal Reserve. With still such a tight and growing job market, the Fed is at ease and keep rates elevated for longer as needed to get inflation back to 2%.
Crude Oil (WTI) trades at $70.88 per barrel and Brent Oil trades at $75.55 per barrel at the time of writing.
Oil news and market movers: Cuts are no Cuts
- Bloomberg analysts have calculated that the announced cuts in the recent OPEC+ meeting will actually not take place as non-participating countries on the production cuts, will be surpassing the reduced volumes by pumping up even more as normal.
- The International Energy Agency (IEA) remains bearish on its outlook for Oil, pointing to still muted demand from China.
- Meanwhile US Shale production has been growing substantially and is one of the main reasons for the massive number in exports from the country on the Oil market.
- Markets and traders need to be on the lookout for any emergency meetings taking place by OPEC or OPEC+, and where more severe measures could be outlined that might trigger a substantial turnaround in the price action.
- Closing off Friday will be with the Baker Hughes US Oil Rig Count near 18:00 GMT. Previous was 505 with no forecast foreseen.
Oil Technical Analysis: Risk to buy into a pop in a bearish market
Oil prices are facing issues, image issues to be precise. Traders are placing further bearish bets on Oil prices after OPEC+ was unable to put firm measures in place that could support the Oil prices and rather move the needle upwards instead of downwards. As long as OPEC+ can not make a united front, more downside is the only outcome with arch nemesis, the US, dumping millions of barrels per day in an already flooded Oil market.
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 for now. For 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.