Market Data 
- Crude Oil turns red on Monday, sliding lower beyond 1%.
- Geopolitical tensions ramp up further after intensified attacks in Lebanon over the weekend.
- The US Dollar Index holds near yearly lows ahead of Fed Chairman Powell’s speech later on Monday.
Crude Oil dips lower with traders ignoring the events taking place over the weekend. Overall, expectations are that Oil prices should get a lift this week, with Chinese measures boosting the demand for Oil in the region. On Sunday, additional measures were introduced by The People’s Bank of China (PBoC) and the National Financial Regulatory Administration, with lower mortgage rates set to boost the housing sector.
The US Dollar Index (DXY), which tracks the performance of the Greenback against six other currencies, gears up for a week full of economic indicators on manufacturing and services activity and employment, ending with the monthly US Nonfarm Payroll release on Friday, although geopolitical tensions are the main theme. Tensions have been building up in Lebanon, where Israel kept bombing several parts of the country and might see Iran starting to get involved in the conflict.
At the time of writing, Crude Oil (WTI) trades at $67.78 and Brent Crude at $71.07.
Oil news and market movers: Traders not keen pricing in more risk premium
- After Israel launched airstrikes against Houthi targets in Yemen and Hezbollah targets in Lebanon, the risk of a broad war in the Middle East is starting to pick up, The Wall Street Journal reports.
- On Monday, Bloomberg reported that the amount of crude oil held around the world on tankers that have been stationary for at least seven days rose to 60.76 million barrels as of September 27, which is 27% lower than a year ago and could point to a pickup in demand.
- Russia is stepping up its attacks on Ukraine’s key energy grid and power plants, with even the nuclear power plant at Zaporizhzhia being under attack, Reuters reports.
- Warren Patterson, head of commodities strategy at ING Groep NV in Singapore, has issued concerns about more upside for the Oil market. “The oil market has become increasingly numb to developments in the Middle East,” said Patterson, underlining the lack of impact on supply, Bloomberg reports.
Oil Technical Analysis: Risk there
Crude Oil prices could still spiral higher, should geopolitical tensions start to spill over and trigger a proxy war in the Middle East. If Iran and Egypt would be pulled into the conflict, it would not take long before several emirate states would start to send military forces to the region as well. In that case, another risk premium would be needed to be priced in with prices set to rally back to $80.00 or higher.
At current levels, $71.46 remains in focus after a brief false break last week. If a supportive catalyst remains present, a return to $75.27 (the January 12 high) could play out. Along the way towards that level, the 55-day Simple Moving Average (SMA) at $73.36 could ease the rally a bit. Once above $75.27, the first resistance to follow is $76.03, with the 100-day SMA in play.
On the downside, $67.11, a triple bottom in the summer of 2023, should support any downturns and trigger a bounce. Further down, the next level is $64.38, the low from March and May 2023.
US WTI Crude Oil: Daily Chart
WTI Oil FAQs
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 12 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.
