- Oil (WTI) price prints a new yearly high.
- US Dollar slips ahead of a key US jobs report.
- Baker Hughes Oil rig count data due this Friday.
Oil price spikes an breaks the top with a new yearly high with recent data this Friday showing that Saudi Arabia crude exports have not been this low in over 30 months. Though still officially unconfirmed, is that Saudi Arabia and Russia are due to announce that they will do more in terms of supply control. Riyadh is expected to extend its 1 million barrel-per-day curb. Meanwhile, Russian Deputy Prime Minister Alexander Novak mentioned that a 300,000 barrel cut per day will be materialising this month.
This shakes up the supply side in oil, meaning that market participants need to dig deeper into their wallets. At the beginning of the week, Crude was just barely below $80, while it currently trades above $83. A new yearly high could be in reach, depending on the official announcements of both Saudi Arabia and Russia in the coming days.
At the time of writing, Crude Oil (WTI) price trades at $84.10 per barrel and Brent Oil at $87.60
Oil news and market movers
- Kuwait is being added to the list of countries where exports slumps, with levels hitting a 6-year low from the Persian Gulf state..
- Saudi Arabia Crude export numbers reveal a substanial cut in production to only 5.5 million barrels per day in August, from 6.2 million in July and 6.6 in June.
- The refinery outage at Garyville, Louisiana, is solved and back online.
- Shanghai weekly medium Sour Crude Stockpiles dropped by 15%.
- India refineries are dealing back with traditional suppliers as the lucrative cheap Russian oil supply looks to be abating.
- The key US jobs report, or Nonfarm Payrolls (NFP), will be released at 12:30 GMT. From all its components, some have more potential than others to affect markets. The change in the NFP is the key figure, and it is expected to decline from the previous 187K to 170K. The average MoM Hourly Earnings change, which gauges wage growth, is expected to slow down a touch from 0.4% to 0.3%. Meanwhile, the overall unemployment rate is expected to stay steady at 3.5%.
- Final confirmation from the earlier move on the back of the US Nonfarm Payrolls will come from the ISM Manufacturing PMI for August, which is expected to increase slightly from 46.4 to 47.0. Despite the rise, this would still signal a contraction in US factory activity. The Employment Index is expected to stay broadly steady from 44.4 to 44.2. The New Orders Index is forecast to fall from 47.3 to 46.3;, and the Prices Paid Index is seen increasing from 42.6 to 43.9.
- Data from the Baker Hughes US Oil Rig Count is expected to close off this week at 17:00 GMT. The previous number was at 512, and a lower number could possibly become an 18-month low.
- Equity markets are mixed this Friday as investors await more guidance from the US jobs report on Friday.
Oil Technical Analysis: Crude on a tear
Oil price has snapped its losing streak with a fourth consecutive day of gains this week. Crude is flirting with a new yearly high. In case supply cuts are higher than expected, with more drawdowns in strategic stockpiles in the coming weeks, Oil might be heading back to $92.
On the upside, $84.28, the high of August 10, is the one to beat in order to have that bullish breakout confirmation. Should WTI continue to rally on the back of lower supply and more demand, not many elements could be standing in the way of reaching that blue line at $92.80. Of course, the $90 big figure psychological level needs to be faced first.
On the downside, a temporary bottom is being formed around $77.50, which acted as a base for this week. Should the Baker Hughes Rig Count jump substantially higher, expect to see the floor tested as more supply is bound to come online. Once bears make it through that yellow box level, expect to see more downside toward $74 before finding ample support to slow down the sell-off.
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WTI US 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 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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