Oil takes a hit with Russia not complying to OPEC+ production cuts

• WTI Oil sinks further as oversupply keeps hitting markets. 
• Despite Red Sea tensions, Oil is still flowing. 
• The US Dollar Index popped above 103 and is at crossroads with more upside on the radar. 

Oil prices are dropping nearly 1% again this Wednesday with Oil traders sending the black fuel cheaper. The move comes on recent numbers from Russia that reveal it is not complying with the production cuts it agreed upon in the last OPEC+ meeting last year. With Russia’s seaborne crude hitting a near 3.43 million barrels per day, it is breaching its commitment to lower its production by 500,000 barrels per day with instead only 134,000 barrels per day. 

Meanwhile, the DXY US Dollar Index is back on the map with first the victory of the former US President Donald Trump in Iowa triggering a substantial appreciation of the Greenback. A second appreciation came overnight with US Federal Reserve’s Christopher Waller who backtracked on earlier dovish comments and now pushed back against the enthusiasm of the markets. In a repricing towards interest rates remaining steady for longer, equities are dropping, yields are soaring and the Greenback has the wind in its sails. 

Crude Oil (WTI) trades at $71.05 per barrel, and Brent Oil trades at $76.58 per barrel at the time of writing. 

Oil News and Market Movers: A lot of moving parts

• The World Economic Forum in Davos is entering its third day with already quite a few comments from central bankers coming out.
• The Monthly OPEC Market report is due to be released near 12:00 GMT.
• Near 21:30, the American Petroleum Institute (API) is due to release the weekly Crude Oil Stockpile. Previous number was a big drawdown of 5.215 million barrels. 
• Local Oil prices in the US are seeing a wider differential with the Bakken shale production facing an outage. Prices near Houston went up by $2.20 per barrel against Cushing (Oklahoma) prices. Substantial drawdowns might occur at Cushing as well, as Midwest refiners will need to revert to Cushing, in order to replace lost supply out of Bakken via the Dakota pipeline. 

Oil Technical Analysis: Can the OPEC report move the needle?

Oil prices are being hit again, for a third day this week. While already trading at a weekly loss, the revelation that Russia is breaching the production cuts it committed to, means bad news for the balance between supply and demand. Another surge in supply means the balance is titled again to lower prices with refiners and buyers have the luxury to pick out the cheapest one to buy from in an overcrowded market of sellers. 

On the upside, $74 continues to act as a line in the sand after yet another failed break above it on Friday.  Although quite far off, $80 comes into the picture should tensions build further. Once $80 is broken, $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