Oil price trades flat in the upper $67s (Brent in the lower $72s) on Thursday after making a small recovery from just above $67 reached the day before when sellers dominated the market. The rebound came after the US debt-ceiling extension bill was successfully voted through the House of Representatives, late on Wednesday evening. Oil price gained further support after several US Federal Reserve (Fed) officials said they thought interest rates should be left as they are at the next Fed meeting. Those gains were capped, however, after data from the American Petroleum Institute (API) showed a larger-than-expected rise in Oil inventories, indicating ample supply.
WTI Oil price continues to decline as the longer-term bearish trend extends. Given the old saying about the trend being your friend, this favors short sellers over longs. WTI Oil is trading below all the major daily and weekly Simple Moving Averages (SMAs) but has found support at the 200-week SMA at $66.90 from where it is making an intraday recovery.
WTI US Oil: Weekly Chart
Oil price has decisively broken below the May 22 lows of $70.65 as well as the $69.40 May 15 lows. Only the 200-week SMA now stands in the way of further losses. If it breaks below that too, it could lead to further weakness down to the year-to-date (YTD) lows of $64.31.
WTI US Oil: Daily Chart
A break below the YTD lows would reignite the downtrend, with the next target at around $62.00, where trough lows from 2021 will come into play, followed by support at $57.50.
Oil price needs to climb back above the $74.70 May 24 highs to raise doubts about the dominant bearish trend.
Such a break might lead to a potential target in the $79.70s, which roughly coincides with the 200-day SMA and the main trendline for the bear market, heightening its importance as a key resistance level.
The long hammer Japanese candlestick pattern that formed at the May 4 (and YTD) lows is a sign that Oil price may have formed a strategic bottom at that level.
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.
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