📖 Your Q2 Earnings Guide: Discover the Stocks ProPicks AI Highlights to Jump Post-EarningsRead more

Crude Oil Cannot Rise on Risk Alone

Published 10/17/2023, 05:31 AM
Updated 03/21/2024, 07:45 AM

Oil made curious movements last week. After opening last week with a gap of 2.3% and quickly rising to 5.2%, the price stabilized and turned downwards. On Thursday, the gap at the week's opening was closed entirely. Given the current geopolitics, it is unlikely that many people at the beginning of the week could have expected such a quick closing of the gap.
Oil Price Movements

Anyway, the closing of the gestalt technically cleared the space for oil to rise. Fundamentally, oil was actively bought on fears that other Islamic countries would get involved in the conflict. The markets are paying the most attention to statements regarding Iran, which produces over 3.1M BPD. Since the end of last week, Iran has been toughening its rhetoric, which was played back by the markets on Friday in the form of a 5% rise in quotations and a rise in price at the start of the new week.

However, geopolitics is not the only fundamental driver of oil prices. Last week, the US ramped production to a record 13.2 million barrels. These reports, as well as a 10.2-million-barrel jump in commercial inventories, pressured quotes midweek.

Towards the end of the week, the Middle East again drew attention to the risks of geographic expansion of the conflict, which increased the risks of a decline in supplies.
US Crude Production

However, one should not underestimate the factor of production growth in the US. Producers there have increased average daily production by 1 million barrels since August.

It seems that US oil producers, after the August OPEC+ assurances, have finally joined the fight for a share of global oil supplies. This comes after another round of assurances from Russia and Saudi Arabia that quotas and voluntary cuts on top of those quotas will remain in place for the foreseeable future.

It is also possible that the trigger was the price, which exceeded $80 per barrel of WTI in August and has been trading above $90 since the second half of September.
US Crude Inventories

That said, oil prices may already be too high for consumers, and we may see a reduction in supply. In addition, the risks of supply cuts from Iran and other Middle Eastern countries are real but still risks. But at the same time, supply from the US is increasing while demand is giving up.

All this is a good enough reason to test the support at $80 per barrel WTI once again.

The FxPro Analyst Team

Latest comments

Loading next article…
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.