USOIL OPEC+ - heading towards 70 with a recovery towards 74!

The price of oil is currently breaking the November low due to an increase in supply, with US exports exceeding 6 million barrels per day. Simultaneously, Saudi Arabia is reducing crude oil export prices in Asia. Meanwhile, the US dollar (USD) is consolidating for the third consecutive day, with the US Dollar Index (DXY) near 104.00, with the possibility of further increases during the week. Despite US yields decreasing, they are doing so more slowly compared to other currencies, favoring the US dollar. US crude oil exports could reach approximately 5.7 million barrels per day, according to ship tracking companies Kpler and Vortexa. Weekly data from the American Petroleum Institute (API) overnight revealed a growth of 0.594 million barrels compared to the previous week's decrease of 0.817 million barrels. Oil prices are declining due to the surplus supply, with the United States contributing significantly as a producer. The surplus could persist for months before OPEC+ can adjust production to address the supply excess. Further price declines are anticipated until an OPEC+ decision or a shift in the market context. On the upside, the key resistance is at $80.00, and if the price manages to surpass this level, it could reach $84.00 as the next target. However, above $84.00, there may be selling pressure or profit-taking. If prices consolidate above $84.00, the $93.00 level could become relevant again. On the downside, support is near $74.00, collapsing with the new November low. This level acts as the last line of defense before descending to $70.00 and beyond. $67.00 is a key support level, aligned with a triple low from June, and could be the next focus for trading.

Comment:

WTI prices are hitting their lowest since July, driven by investor concerns over China's oil demand growth and the effectiveness of the OPEC+ voluntary production cut. According to data released on Thursday by the General Administration of Customs in China, the world's leading oil importer, arrivals have reached 10.33 million barrels per day (bpd). This figure represents a 10.4% decrease from October's 11.53 million bpd and a 9.3% drop compared to the same month the previous year. These developments are fueling worries about the Chinese economy and exerting selling pressure on WTI prices. . Oil markets are also discontented with the uncertainty surrounding OPEC+, comprising OPEC members and allies such as Russia, and their ability to deliver on the promised 2.2 million bpd production cuts in the first quarter of the upcoming year.

Comment:

In the dynamic world of oil markets, the Western Texas Intermediate (WTI) benchmark has experienced a notable rebound, currently trading at $70.85, recovering from its six-month lows. This upswing follows a significant call to action from two major players in the global oil landscape, Saudi Arabia and Russia, urging all OPEC+ members to commit to production cuts. The joint effort aims to stabilize global oil markets and has the potential to lift WTI prices, marking a positive turn of events.

However, amidst these developments, a contrasting narrative emerges from China, the world's largest crude oil importer. Recent data indicates a 9% year-on-year decline in China's crude oil imports for November. Contributing factors include elevated stockpile levels, adverse economic indicators, and reduced orders from independent refiners, collectively exerting selling pressure on WTI prices.

Another significant factor contributing to the downward trend in WTI prices is the specter of a global economic slowdown and recessionary concerns. The International Monetary Fund's projections for 2023 and 2024 anticipate global growth at 3.0% and 2.7%, respectively, both lower than the earlier forecast of 3.0% made in July.

Looking ahead, oil traders are keenly anticipating the release of the US Nonfarm Payrolls report on Friday, along with key indicators such as the Unemployment Rate and Average Hourly Earnings for December. These data releases have the potential to significantly impact the USD-denominated WTI price. As traders seek valuable cues from this information, opportunities for strategic trading around WTI prices are likely to emerge. The intricate interplay of geopolitical factors, economic indicators, and global market dynamics continues to shape the trajectory of WTI prices, keeping the energy market on a watchful edge.