- WTI Oil snaps above 75 after Houthi Rebels hit a commercial ship.
- Russian Oil loading in Black Sea halted due to severe storms.
- The DXY US Dollar Index flirts with more downside.
Oil prices are jumping higher this Wednesday with several geopolitical tensions back on the table. Yemeni Houthi rebels said on Tuesday that they attacked a commercial MSC United ship in the Red Sea after issuing three warning calls. Meanwhile Reuters is reporting that Russia is halting its Black Sea loadings at Novorossiysk due to severe weather conditions.
The US Dollar (USD) meanwhile is again residing near session lows with the Greenback not finding any support amidst all these geopolitical tensions. With US equities slowly but surely reaching all time highs, the risk-on sentiment in that asset class is the main driver for the devaluation of the US Dollar. The Greenback has no catalyst or main driver for now that could spark a turnaround.
Crude Oil (WTI) trades at $75.24 per barrel, and Brent Oil trades at $80.50 per barrel at the time of writing.
Oil News and Market Movers: Oil headlines buzzing
- Reuters reports that Russia has halted Crude loadings in port Novorossiysk, due to severe weather conditions in the Black Sea.
- Linked to the above, Kazakhstan is reporting it is pausing its Oil output with the Caspian Pipeline Consortium (CPC) halting acceptance.
- Houthi Rebels attacked a commercial MSC United ship in the Red Sea on Tuesday.
- Deputy Prime Minister Alexander Novak said in an interview at Rossiya 24 TV Channel that Brent prices are to average $80-85/bbl in 2024. Russian Oil producers are complying with OPEC+ production restrictions.
Oil Technical Analysis: Crude to pop 10%
Oil prices are on track to hit $85 within a few weeks at this pace. The markets are redirecting their view as the current economic slowdown might be priced in, in full, Any hiccup in any way or form for the supply side could mean an uptick for Crude prices in the coming weeks.
On the upside, $74 got broken and tested for support, offering more upside. Once through there, $80 comes into the picture. Although still far off, $84 is next on the topside once Oil sees a few daily closes above the $80 level.
Below $74, the $67 level could still come into play as the next support level to trade at as it aligns with a triple bottom from June. Should that triple bottom break, a new low for 2023 could be close at $64.35 – the low of May and March – as the last line of defence. Although still quite far off, $57.45 is worth mentioning as the next level to keep an eye on if prices fall sharply.
US WTI Crude 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.
Breaking News: Russian Oil Deliveries Delayed, Causing Oil Prices to Skyrocket!
The global oil market was rocked by a major shock on Thursday, 28th October 2021, as news broke that Russian oil deliveries were being delayed. This delay has sent shockwaves through the industry, causing oil prices to soar overnight and leaving many reeling and uncertain about the future of the market.
In this article, we will delve into the details of this breaking news, examining why this delay has occurred, the impact it has had on oil prices, and what we can expect in the coming days and weeks.
Understanding the Delay
According to reports, Russia’s state-owned oil company, Transneft, is responsible for the delay. The company announced that it was forced to delay its oil deliveries to Europe due to issues with its oil supply infrastructure, specifically its Druzhba pipeline that runs through Belarus.
This pipeline normally transports around 1 million barrels of oil per day, which amounts to around 20% of the total Russian oil exports to Europe. However, it has been reported that due to maintenance work on this pipeline, it will be out of action for at least 10 days, causing a major delay in the delivery of Russian oil. This delay has caught many by surprise and has sparked concern throughout the oil industry.
Impact on Oil Prices
The news of the delay has had an immediate impact on oil prices. Within hours of the announcement, oil prices rose to their highest levels in almost 7 years. Brent crude jumped by as much as 2.6%, reaching a peak of $86 per barrel, while US crude rose by 2.5% to $84.03 per barrel. These are significant price increases considering both oil benchmarks were hovering around $78 per barrel just a day earlier.
The reason for such a drastic increase in oil prices can be largely attributed to the unexpected nature of the delay. Russia is a major oil producer, second only to Saudi Arabia, and any disruption in its supply has a significant impact on the global oil market. The delay in Russian oil deliveries creates a shortfall in supply, which in turn drives up prices as demand continues to be strong. This highlights how heavily reliant the world is on Russian oil, and any delays or disruptions will have a domino effect on the market.
Potential Long-Term Effects
As the delay continues and oil prices remain high, we can begin to see the potential long-term effects. The first and most obvious impact will be felt by consumers, as the cost of gasoline and other petroleum products will increase. This will have a ripple effect on the global economy, as higher oil prices can lead to inflation, and businesses may have to pass on the increased costs to their customers.
In the longer term, this delay also raises concerns about the stability of the global oil market. The fact that a maintenance issue on one pipeline can cause such a significant delay and impact on prices highlights the potential fragility of the market. This could lead to countries diversifying their energy sources and looking for more sustainable alternatives, which could have a lasting impact on the demand for oil.
Tips for Dealing with Fluctuating Oil Prices
With the current uncertainty in the oil market, it can be challenging for businesses and consumers to plan and budget effectively. However, there are some practical tips that can help deal with fluctuating oil prices:
1. Keep an eye on the market: Stay informed about the latest news and developments in the oil industry to understand how it may impact prices.
2. Diversify energy sources: Consider alternative energy sources and invest in renewable energy to reduce reliance on traditional fossil fuels.
3. Use fuel efficiency techniques: Implementing fuel efficiency techniques can help lessen the impact of high oil prices. Simple actions such as carpooling or driving at a consistent pace can save a significant amount of fuel in the long run.
4. Be strategic with purchasing decisions: Consider stocking up on fuel when prices are low, or negotiate bulk purchase discounts with fuel suppliers.
5. Reduce energy consumption: Be mindful of energy consumption, both at home and in the workplace. Simple measures such as switching off lights and unplugging electronics when not in use can lead to significant cost savings.
The delay in Russian oil deliveries has caused a major disruption in the global oil market, resulting in a sharp increase in prices. This has raised concerns about the stability and reliability of the market and highlights the need for alternative and sustainable energy sources. It is critical for businesses and consumers to stay informed and take practical measures to mitigate the impact of fluctuating oil prices on their operations and daily lives. By staying informed and implementing strategies, we can better navigate this volatile market and minimize its impact on our economy.