Oil takes technical cooldown as headline risk declines
- Oil (WTI) goes sideways in the range between $88 to $93.
- The US Dollar consolidates a new six-month high and is set to close a tenth consecutive week in the green.
- Headline decline from Saudi Arabia or Russia guides oil prices in a calmer regime.
Oil prices are entering a calmer pattern that is more than welcome to the overheated rally in both WTI Crude and Brent oil prices. Traders will want to see the print of the Baker Hughes Rig Count later this Friday if it has bottomed out and a more gradual rise is being noticed with more rigs coming online. Some demand could pick up next week as recent reports show China crude inventories are at their lowest level since June.
The US Dollar (USD) had another strong day on Thursday, booking gains against nearly every major G20 currency. Backed by higher US yields, the Greenback advances in an environment where the rate differential seems to be the driving factor to determine which currency weakens and which appreciates. With the US 10-year yield hitting 4.51%, breaking above the high all the way back in October 2007, it looks like King Dollar is affirming its earned title.
Crude Oil (WTI) price trades at $89.46 per barrel, and Brent Oil trades at $92.37 at the time of writing.
Oil news and market movers
- Onshore Chinese crude inventories are at their lowest level since June. Meanwhile, China hit a record volume of Russian oil imports during August.
- Russia temporarily bans diesel exports, triggering a firm rise in European prices.
- The US Keystone crude pipeline is coming back online after a few days of outage.
- The weekly Baker Hughes US Oil Rig Count is due this Friday at 17:00 GMT. Previous number last week was at 515 and at 512. A gradual rise would be bearish for oil prices.
Oil Technical Analysis: Take a breather
Oil prices are entering a bit of a calm path after the very steep and headline-driven moves seen in the past few weeks. At the moment it looks like WTI Crude price will fade ahead of making a new yearly high. A technical floor is identified and would cool down the Relative Strength Index (RSI) and might see crude breaking $93 later this year.
On the upside, the double top from October andNovember of last year at $93.12 remains the level to beat. Although this looks very much in reach, markets have already priced in a lot of possible supply deficits and a bullish outlook. Should $93.12 be taken out, look for $97.11, the high of August 2022.
On the downside, a new floor is formed near $88 with the high of September 5 and 11 underpinning the current price action. Proof of that already exists with the dip of September 21 that reversed ahead of $88. Should $88 break nonetheless, the peak of August 10 needs to be enough to catch the dip near $84.20.
WTI US OIL daily chart
Natural Gas FAQs
What fundamental factors drive the price of Natural Gas?
Supply and demand dynamics are a key factor influencing Natural Gas prices, and are themselves influenced by global economic growth, industrial activity, population growth, production levels, and inventories. The weather impacts Natural Gas prices because more Gas is used during cold winters and hot summers for heating and cooling. Competition from other energy sources impacts prices as consumers may switch to cheaper sources. Geopolitical events are factors as exemplified by the war in Ukraine. Government policies relating to extraction, transportation, and environmental issues also impact prices.
What are the main macroeconomic releases that impact on Natural Gas Prices?
The main economic release influencing Natural Gas prices is the weekly inventory bulletin from the Energy Information Administration (EIA), a US government agency that produces US gas market data. The EIA Gas bulletin usually comes out on Thursday at 14:30 GMT, a day after the EIA publishes its weekly Oil bulletin. Economic data from large consumers of Natural Gas can impact supply and demand, the largest of which include China, Germany and Japan. Natural Gas is primarily priced and traded in US Dollars, thus economic releases impacting the US Dollar are also factors.
How does the US Dollar influence Natural Gas prices?
The US Dollar is the world’s reserve currency and most commodities, including Natural Gas are priced and traded on international markets in US Dollars. As such, the value of the US Dollar is a factor in the price of Natural Gas, because if the Dollar strengthens it means less Dollars are required to buy the same volume of Gas (the price falls), and vice versa if USD strengthens.
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