Crude Oil prices took a hit, falling close to 3% after OPEC confirmed that it would increase its oil supply starting in October. This news eliminates the possibility of delaying the suggested production cuts that were set to be rolled back in October. With more supply coming online than demand for it, the supply outlook has increased again. The US Dollar Index (DXY) has traded above 101.00, with the release of the Personal Consumption Expenditures (PCE) Price Index for July confirming a soft landing. This gives the Fed a green light for a rate cut in September. At the time of writing, Crude Oil (WTI) trades at $73.54 and Brent Crude at $77.14.
A Reuters headline just ahead of the US Opening Bell confirmed that OPEC would be moving forward with its committed production reopening. This decision comes despite the sudden supply disruption from Libya that could potentially result in a shortage of 1 million barrels a day, accounting for roughly 1% of global supply. In other news, Indonesia’s state-owned Pertamina is seeking to buy Russian Oil for November delivery, and the Greek-flagged crude Oil tanker Sounion is still burning in the Red Sea. Yemen’s Houthi rebels have agreed to allow tugboats and rescue ships to reach the damaged tanker. The weekly Baker Hughes US Oil Rig Count will also be released later today.
The Baker Hughes Rig Counts are an important indicator for the drilling industry and its suppliers. The active rig count acts as a leading indicator of demand for products used in drilling, completing, producing, and processing hydrocarbons. This specific case represents the number of rigs drilling exclusively for oil. Technical analysis for Crude Oil suggests that it is set to make a pivotal choice in Friday’s close, with the key level to hold being $75.50 to retest upside levels. On the downside, the low from August 5 at $71.17 is seen as the key support level.
WTI Oil is a type of Crude Oil sold on international markets, sourced in the United States and distributed via the Cushing hub. The price of WTI Oil is influenced by global growth, political instability, decisions by OPEC, and the value of the US Dollar. The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) also impact the price of WTI Oil. OPEC, a group of 13 Oil-producing nations who collectively decide production quotas, plays a key role in determining WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply and push up Oil prices, while increased production has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, with Russia being the most notable.
