Oil slides lower on Saudi Arabia price cuts, despite Indian demand pickup

• WTI Oil falls to around $71 on Monday morning.
• Saudi Arabia is offering discounts across the globe for its Crude.
• The DXY US Dollar Index holds above 102.00 as traders await US inflation figures later this week. 

Oil declined to around $71 on Monday morning after prices tried and failed to pump back above $74 last week. Headlines this morning from Saudi Arabia are pushing down prices, with state-owned Oil company Aramco offering discounts on several regions, with biggest discounts for Asia for its Oil deliveries. Markets are pricing in these price cuts, though this could be positive for Oil prices in the longer run as cheaper supply could ramp up demand. India, for example,  is already reporting another surge in demand for Oil as the country’s economy is outperforming. 

Meanwhile, the US Dollar (USD) is paring back some losses it incurred in late December. The recovery comes on the back of the latest US jobs report, which points to a still buzzing job market, though the Institute for Supply Management numbers signalled a severe slowdown ahead. The Greenback is now getting torn between safe-haven flows on the back of rising tensions in the Middle East and the Red Sea, while the other camp is betting on swift rate cuts by the Fed to avoid a recession. With US Consumer Price Index (CPI) numbers this week, traders could possibly get reassurance whether rate cuts could be around the corner or not. 

Crude Oil (WTI) trades at $71.76 per barrel, and Brent Oil trades at $76.67 per barrel at the time of writing. 

Oil News and Market Movers: Aramco keeps firesale

• OPEC+ leader Saudi Arabia is offering substantial cuts in its official Oil prices to Asia and other regions. For Asia specifically, prices are lowered to the lowest level since 2021.
• In a spillover effect, Oil-related stocks are sliding lower, with the Oil stock Index down 2%, the most since December 4. Shell fell as much as 2.5%, becoming the biggest loser  in the Stoxx 600 Index.
• India sees a sharp ramp-up in demand for Oil products with the economy booming at a record pace. Diesel consumption is swelling by 5% compared to last year. 
• Rumours in OPEC+ are pointing to some more departures of a few countries from the bloc. Countries like Gabon, Equatorial Guinea and Congo are said to be  reevaluating their participation. 

Oil Technical Analysis: One step back, two steps forward

Oil prices are declining this Monday on the back of Saudi Arabia offering discounts across the board. Although the initial move in Oil prices, which is down, is granted, the medium term could result in quite the opposite. With nations like India and other emerging markets reconfirming a boom in economic activity, demand is set to expand, while frost in Europe could mean ample demand is also coming back online in the Oil market. 

On the upside, $74 is still holding importance, although the level has become very chopped up. Once back above this, $80 comes into the picture. Still far off, $84 is next on the topside once Oil sees a few daily closes above the $80 level. 

Below $74, the $67 level could still come into play as the next support 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