Oil price recovers above $74 as Angola leaves OPEC cartel over lower production quotas

• WTI Oil pops back above $74 in a volatile week ahead of Christmas.
• Angola announced on Thursday it will leave OPEC in January. 
• The DXY US Dollar Index flirts with a substantial breakdown that could erase a half year worth of gains.

Oil prices are back on track towards $84 on Friday, propelled by geopolitical tensions in the Red Sea. Still making headlines going into these last hours of trading before Christmas, Houthi rebels have made the Red Sea a no-go zone for all big freight operators. With a vast number of fleets being redirected around Africa, the demand and price pressure are expected to jump in the coming weeks for Crude. Meanwhile, Angola announced Thursday that the country is leaving OPECi9c-fza1 due to disagreements over lower Oil quotas for the country.

The US Dollar (USD) is sinking as markets go all-in on interest-rate cuts for early 2024. The move comes in contradiction with several warnings from Federal Reserve (Fed) members, who came out saying markets are too eager and too enthusiastic about any rate cuts coming in 2024. The elevated rate differential from US yields against other countries – the main driver for the US Dollar strength in 2023 – appears to be fading, likely leading to mayhem and dislocation between the Fed and global markets at the start of 2024.

Crude Oil (WTI) trades at $74.81 per barrel, and Brent Oil trades at $79.94 per barrel at the time of writing. 

Oil News and Market Movers: Angola is gone

• Angola said on Thursday that it will leave OPEC in January. The news does not come as a surprise because Angola was one of the leading African nations that was opposing Saudi Arabia in its demand to share production cut burdens with the whole OPEC group.
• A steep decline in the number of tankers in the Red Sea is being reported on Friday morning.
• The Baltic Dry Index rallies higher, with shipping costs soaring because of the longer route around Africa.
• Should Friday’s US data confirm a further decline in inflation, expect to see Crude shoot higher as demand is expected to pick up in early 2024 with rate cuts from the Fed firing up the economy. 

Oil Technical Analysis: Angola gone, who is next?

Oil prices are jumping higher as the OPEC+ club faces increasing woes.  With Angola leaving the bloc, several other African nations could join. The statement could not have come at a worse time as Brasil is set to enter the organization as an observer, not taking part in production decisions. The more OPEC loses its grip on Oil prices, the wilder and more volatile the price action will get. 

On the upside, $74 got broken and tested for support, offering more upside. Once through there, $80 comes into the picture. Although still far off, $84 is next on the topside once Oil sees a few daily closes above the $80 level. 

Below $74, the $67.00 level could still come into play as the next support level to trade at as it aligns with a triple bottom from June. Should that triple bottom break, a new low for 2023 could be close at $64.35 – the low of May and March – as the last line of defence. Although still quite far off, $57.45 is worth mentioning as the next level to keep an eye on if prices fall sharply. 

US WTI Crude Oil: Daily Chart