Crude Oil prices dipped below $67 on Friday due to weaker than expected US jobs data. However, prices rebounded slightly on Monday as the US economy showed signs of cooling but not on the verge of a recession. This eased the likelihood of a hefty interest rate cut by the US Federal Reserve, which would have boosted US demand. With China and India also experiencing softer economic activity, global demand for Oil is deteriorating. The US Dollar Index, which tracks the performance of the US Dollar against a basket of currencies, is trading above 101.50, extending recent gains.
Major commodity traders Trafigura Group and Gunvor Group painting a bleak picture for Oil, citing concerns over Chinese demand and oversupply. Morgan Stanley has also cut its forecast price for Brent Crude for the fourth quarter to near $75. China is seeking to strengthen ties with Oil-producing countries, with its Premier Li Qiang scheduled to visit Saudi Arabia and the UAE. Furthermore, a weather system in the Gulf of Mexico is forecasted to become a hurricane, potentially impacting the country’s refining capacity. Overall, the outlook for Oil is not promising due to weak demand and oversupply.
Experts from Trafigura Group and Gunvor Group anticipate further downturn for Oil due to US export levels and Russia’s struggle to sell crude to China and India without disrespecting OPEC+ agreements. Oversupply in the market is being exacerbated by the economic slowdown, suggesting that more downturn is likely. Looking at technical analysis, the $67.11 and $68.00 levels are critical in determining potential price movements. If prices break below $67.11, the next significant support level is $64.38, the low from March and May 2023.
WTI Oil, short for West Texas Intermediate, is a high-quality Crude Oil sourced in the United States and distributed via the Cushing hub. It is considered a benchmark for the Oil market and its price is frequently quoted in the media. Global factors such as supply and demand, political instability, and the decisions of OPEC are key drivers of WTI Oil price. The weekly Oil inventory reports from the American Petroleum Institute and Energy Information Agency also impact Oil prices, with changes in inventories reflecting supply and demand fluctuations.
OPEC, a group of 13 Oil-producing nations, collectively decide production quotas for member countries, which can impact WTI Oil prices. When OPEC reduces quotas, it tightens supply and raises Oil prices. Conversely, increasing production lowers prices. OPEC+ includes additional non-OPEC members like Russia and their decisions also influence Oil prices. The value of the US Dollar also plays a role in determining WTI Oil prices, as Oil is predominantly traded in US Dollars. A weaker US Dollar can make Oil more affordable, while a stronger Dollar can make it more expensive.
