• Wed. Jul 24th, 2024

Oil steady at weekly high ahead of EIA

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  • Oil (WTI) rallies higher this week with demand side taking over while supply could be seen slowing down.
  • US Dollar strength abates after US JOLTS data points to weakening labor demand. 
  • The Energy Information Administration is due to print its weekly numbers. 

Oil prices rally stalls briefly after the US ADP job numbers which came in lower than the previous month and below estimates, from 371K to 177K. Adalia has turned into a life-threatening hurricane that is going over Florida, risking supply issues for deliveries of gas and oil further up north. Adding to that, data from the American Petroleum Institute showed a big drawdown in stockpiles, from -2,418M to -11,486M.

As if that is not enough, the rumour is buzzing in the commodity space that OPEC+ is preparing the announcement of more production cuts to come at its November meeting. Meanwhile, the Greenback is sliding lower as traders start to price in a slowdown in the US economy. A perfect storm is brewing from the macro, stockpile and geopolitical sides that has the potential to push oil further up this week.

At the time of writing, Crude Oil (WTI) price trades at $81.43 per barrel and Brent Oil at $85.25.

Oil news and market movers

  • The American Petroleum Institute (API) released its numbers for this week. the figures showed a staggering 11.486 million barrel draw in US crude inventories, well above the 2.418 million barrels draw seen a week earlier.
  • Should the Energy Information Agency (EIA) at 14:30 print another big drawdown, Crude price could post a new weekly high. Last week there was a cut of 6.135M, and the markets expects a decline of only 3.267M. With the already staggering print of the API overnight, the EIA number needs to be a big beat in terms of drawdown in order to really trigger another big move higher.
  • The US Gross Domestic Product numbers this Wednesday at 12:30 could trigger a small pullback, should the numbers signal a slowing US economy, which means less demand for oil.
  • Friday’s monthly US jobs report is key.. After the US Federal Reserve officials repeated at Jackson Hole they are prepared to keep rates higher for longer, any sudden slowdown in the US jobs market could force the hand of the Fed to start easing market conditions by cutting rates, which would mean a weaken the Greenback.
  • Storm Adalia is making its way over Florida and has turned into a life threatening Hurricane.  The production and supply for the Eastern part of the United States could come under pressure and might see Oil prices shooting higher as less supply will be available in a brief period. A state of emergency has been issued by the White House.
  • Equity markets are rallying for a third straight day this week, helping demand for commodities.

Oil Technical Analysis: ADP out of the way

Oil price rallies firmly with more demand than supply foreseen in the coming weeks. This week traders will want to see if the tables have flipped, with this time the API printing a staggering drawdown (yellow box on the chart), while the EIA could undershoot expectations and trigger pullback and some profit taking. Meanwhile, oil will react to any contraction or disappointment in the US Gross Domestic Product numbers coming out at 12:30 GMT.

On the upside, $81.68, Monday’s high, is the one to beat in order to trigger a small uptrend. Should WTI continue to rally and break that red descending trendline, more new highs will come into play. In order to print a fresh monthly high, the peak of mid-August at $84.32 is the target when demand takes over and supply cannot follow suit.

On the downside, a temporary bottom is being formed around $77.50 and acts as a base for this week. Should the Baker Hughes Rig Count jump substantially higher, expect to see the floor tested as more supply is bound to come online. Once bears make it through that yellow box level, expect to see more downside toward $74 before finding ample support to slow down the sell-off.

WTI US OIL (daily chart)
WTI US OIL (daily chart)

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