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Crude Oil receives floor after API puts traders on edge over upcoming EIA release for this week

  • Oil prices are further rebounding above $70.00 after surprise drawdown in US API data. 
  • Kazakhstan will break its commitment to OPEC+ production limitations in 2025, by raising Oil output next year, according to Bloomberg. 
  • The US Dollar Index orbits around 107.00 ahead of the last Fed meeting and Fed Chairman Powell speech of 2024.

Crude Oil trades higher on Wednesday with the overnight Crude stockpile number from the American Petroleum Institute triggering a floor for now. Some support for Crude Oil prices came after a chunky drawdown in the crude stockpile change numbers from the American Petroleum Institute (API) on Tuesday. With a draw of 4.7 million barrels, larger than the 1.85 million barrels decline expected, Crude Oil prices received a small leg up.

However, Some bearish news for Oil comes from Kazakhstan. Prime Minister Olzhas Bektenov said on Tuesday that he had ordered the Energy Ministry to intensify efforts to increase Natural Gas and Oil output. The Energy Ministry must ensure that 2025 Oil production is at the planned level, Bektenov said, Bloomberg reports.

The US Dollar Index (DXY) – which measures the performance of the US Dollar (USD) against a basket of currencies – is rather flat ahead of the last Federal Reserve (Fed) meeting of 2024. A 25 basis point rate cut, lowering the benchmark rate from 4.75% to 4.50%, is baked in. The focus will rather be on the dot plot projections, which will show whether Fed officials are pricing in a Trump effect with rates steady or higher in the coming years. 

At the time of writing, Crude Oil (WTI) trades at $70.22  and Brent Crude at $73.42.

Oil news and market movers: EIA on deck

  • The Oil production plans in Kazakhstan’s budget indicate an increase of 9.4 million metric tons next year, or about 190,000 barrels a day.  That is more than double the current 41,000 barrels Kazakhstan is producing under the current OPEC+ production limitation agreement, Bloomberg reports.
  • The Energy Information Administration (EIA) is set to release around 15:30 GMT the weekly Crude stockpile change numbers. Expectations are for a drawdown of 1.7 million barrels against last week’s decline of 1.425 million barrels.
  • Pricing of key Middle Eastern grades is rising, according to traders dealing with the typically higher-sulfur, or sour, Oil from the region. Cargoes of Qatar’s Al-Shaheen for February loading were about $1 a barrel more expensive than the regional benchmark, compared with a premium of as much as 70 cents for January, Bloomberg reports.  

Oil Technical Analysis: Either above or below $70

Crude Oil prices look to be unable to move away from the $70.00 in either direction as, for nearly six trading days in a row, Crude Oil prices have been propelled back to that level. With liquidity starting to thin, it looks increasingly likely that this will be the steady level for the last few trading days of 2024.  

Looking up, $71.46 and the 100-day Simple Moving Average (SMA) at $71.03 are acting as firm resistance levels. On Friday, already some selling pressure emerged ahead of that same 100-day SMA. In case Oil traders can plough through that level, $75.27 is up next as a pivotal level, though watch out for quick profit taking with the year-end quickly nearing. 

On the downside, it is too early to see if the 55-day SMA will be reclaimed again at $70.12. That means that $67.12 – a level that held the price in May and June 2023 – is still the first solid support nearby.  In case that breaks, the 2024 year-to-date low emerges at $64.75 followed by $64.38, the low from 2023.

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 12 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.