West Texas Intermediate (WTI), the US benchmark for crude oil, dropped to about $59.90 during early trading in Asia on Tuesday. This decrease was prompted by a stronger US Dollar and worries about global energy demand. The American Petroleum Institute (API) weekly crude oil stock report and the monthly oil market report from the Organisation of the Petroleum Exporting Countries (OPEC) are due to be released soon. Recently, Saudi Arabia lowered the price of its main crude grade to Asia, hitting the lowest point in 11 months. OPEC+ plans to raise production by 137,000 barrels per day in December but will pause production increases in the first quarter of next year. This has raised concerns about a possible global oversupply. However, discussions about possibly reopening the US government may help support WTI prices.

WTI Oil Analysis

WTI Oil is a top-quality crude oil, known for its low sulfur content. Its price is influenced by global supply and demand, political events, and decisions from OPEC. Regular inventory reports from groups like the API can affect prices; lower inventories usually indicate higher demand. OPEC also affects prices by adjusting production quotas among its member countries. With WTI crude now below the important $60 mark, we are seeing new pressure on oil prices due to a stronger US Dollar. This situation highlights ongoing demand worries, especially with recent purchasing managers’ index (PMI) data from China indicating a slowdown in manufacturing. The Dollar Index (DXY) has risen to a three-month high of 106.50, making oil costlier for buyers outside the US. The news that OPEC+ might slightly increase production, even if only temporarily, marks a significant change from their previous strategy of deep cuts throughout much of 2023 and 2024. These cuts helped stabilize prices above $70, so any indication of a change in their supply discipline may lead to further price drops. Traders should keep a close eye on the upcoming OPEC monthly report for any alterations in the group’s future guidance.

Saudi Aramco Pricing Strategy

Saudi Arabia’s choice to lower its official selling prices to Asia is a strong indication of reduced demand, confirming suspicions many have had. This action is worrying because it shows the world’s largest oil exporter is trying to gain market share in a weaker market. Additionally, last week’s EIA report revealed an unexpected inventory increase of 2.1 million barrels against predictions of a decrease, indicating supply is surpassing current usage. While discussions about reopening the US government might provide short-term support, we view this as a small factor compared to the larger trends of global supply and demand. Similar political events, like the late 2018 shutdown, had limited impact on the market. As a result, traders may want to prepare for possible weaknesses by considering buying put options or setting up bear call spreads to protect against a potential drop towards the $55 support level in the coming weeks. Create your live VT Markets account and start trading now.

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