- Crude oil rebounds slightly after falling below $67 on Friday following weaker-than-expected US jobs data.
- Markets see a further deterioration in global demand, while the US Federal Reserve is not expected to cut interest rates aggressively.
- The US Dollar Index is trading above 101.50, extending recent gains.
Crude oil rebounded slightly on Monday after falling on Friday following the US Jobs Report which showed the US economy is cooling but not on the verge of a recession, reducing the chances of a significant 50 basis point interest rate cut by the US Federal Reserve (Fed) at its next meeting on September 18. This means there will be no boost to US demand, while other major oil consumers such as China and India are also experiencing weaker economic activity.
The US Dollar Index (DXY), which tracks the performance of the US Dollar (USD) against a basket of currencies, is rising for the second day in a row. The first rally occurred on Friday following the US Jobs Report. It seems that markets had clearly depreciated the Dollar too much assuming that the Fed would cut rates by 75 or even 100 basis points by November, which does not seem to be the case considering the recent healthy US economic data.
At the time of writing, WTI crude oil is trading at $68.05 and Brent crude at $71.79.
Oil news and market moves: Trafigura paints it black
- Bloomberg reports that major commodity traders Trafigura Group and Gunvor Group Ltd. have painted a gloomy picture for oil, with concerns lingering about Chinese demand and oversupply. Trafigura Group said OPEC+ faces a dilemma in reconciling the group’s goals with what the market needs.
- Morgan Stanley issued another price cut to its forecast for the second time in just a few weeks. Reuters reports that the bank sees Brent crude near $75.00 by the fourth quarter.
- Meanwhile, China is seeking to cement ties with some oil-producing countries, with Chinese Premier Li Qiang scheduled to visit Saudi Arabia and the United Arab Emirates this week, Beijing’s foreign ministry said Monday, according to AFP.
- A weather system in the southwestern Gulf of Mexico is forecast to strengthen into a hurricane before reaching the northwestern U.S. Gulf Coast, the U.S. National Hurricane Center said on Sunday, according to Reuters. The area accounts for more than half of the country’s refining capacity.
Oil Technical Analysis: Cold Winter for Oil
It’s time for further declines for oil after leading experts Trafigura Group and Gunvor Group issued statements saying that further decline is coming for the fossil fuel. In reality, it doesn’t take an expert to think that further decline was inevitable seeing US export levels at record highs and Russia unable to sell its crude to China and India without stepping on the heels of its partners within OPEC+. The economic slowdown is only further exposing the problem of oversupply, which could mean more declines to come.
On the upside, the $75.27 level will be the first level to turn to. Then, the $77.43 level lines up with a downtrend line and the 200-day Simple Moving Average (SMA). In case the bulls can break above it, the 100-day SMA at $77.71 could trigger a rejection.
On Friday, the key level of $67.11 was very briefly broken. For now, the range between that $67.11 and the big figure of $68.00 should be watched like a hawk at risk of falling again. The next level below is $64.38, the low of March and May 2023.
WTI Crude Oil Daily Chart
WTI Oil FAQs
WTI crude oil is a type of crude oil sold on international markets. WTI stands for West Texas Intermediate, one of three main types that include Brent and Dubai crude. WTI is also known as “light” and “sweet” for 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 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 factors determining the price of WTI crude oil. As such, global growth can be a driver of increased demand and vice versa in the case of weak global growth. Political instability, wars and sanctions can disrupt supply and impact prices. Decisions by OPEC, a group of large oil producing countries, are another key driver of price. The value of the US Dollar influences the price of WTI crude oil, as oil is primarily traded in US Dollars, so a weaker 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) influence the price of WTI oil. Changes in inventories reflect fluctuations in supply and demand. If the data show a decrease in inventories, it may indicate an increase in demand, which would push up the price of oil. An increase in inventories may reflect an increase in supply, which pushes down prices. The API report is published every Tuesday and the EIA report the following day. Their results are usually similar, with a difference of 1% between them 75% of the time. The EIA data is considered more reliable because it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 13 oil-producing nations that collectively decide on member countries’ production quotas at biennial meetings. Their decisions often influence WTI oil prices. When OPEC decides to reduce quotas, it can restrict supply and drive up oil prices. When OPEC increases production, the opposite effect occurs. OPEC+ is an expanded group that includes ten other non-OPEC countries, most notably Russia.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
