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Oil falls back below $74 as Libyan supplies normalize after outage

by SuperiorInvest


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  • WTI crude fell 1% on Monday as supply normalizes.
  • Libya reopens its biggest oil field after two-week shutdown due to blackout.
  • The US dollar index is facing selling pressure and could fall this week.

Oil prices fall 1% on Monday as Libya’s state-owned National Oil Corporation said its biggest oil field is coming back online. This means an additional production of 270,000 barrels per day, bringing the OPEC country’s total production back above 1 million barrels per day.

Meanwhile, the US dollar index DXY is facing some selling pressure from a technical perspective. The index recorded lower highs and lower lows on the daily chart, signaling that American dollar is set to drop soon. On the economic data front, traders will face the US this week Gross domestic product print (GDP) and the Fed’s preferred inflation index, the PCE (Personal Consumption Expenditure) price index.

Crude oil (WTI) is trading at $72.78 per barrel and Brent crude at $77.72 per barrel at the time of writing.

  • Oil news and market drivers: Libya adds supply
  • Libya’s Sahara field restarted production after a two-week shutdown, putting the country back above 1 million barrels a day of production, Bloomberg reported.
  • China’s oil figures show that Russia has become the main supplier for the Asian country.
  • Chinese demand rose 8.6% to 14.24 million barrels per day.
  • China left its Prime Loan rates unchanged again on Monday as markets expected more easing to support the economy. This could mean that demand for oil could fall in the coming months.

Oil technical analysis: more pressure on OPEC

Oil prices are struggling again as the OPEC member defies production cuts enforced by Saudi Arabia. After Russia already broke its output cut commitments, Libya is adding more supplies as its biggest oil field comes back online, bringing the country’s output back above 1 million barrels a day.

Up $74 continues to act as a line in the sand after Friday’s failed breakout above it. While it’s quite a long way off, $80 comes into play in the event of another surge in tension. Once $80 is broken, $84 is on the upside.

Below $74, the $67 level could still come into play as another support to trade on, as it coincides with a triple day since June. Should this triple bottom break, a new low could be close at $64.35 – the low of May and March 2023 – as a last line of defense. While still quite a ways away, $57.45 is worth noting as another level to watch if prices drop sharply.

US WTI crude oil: daily chart

Frequently asked questions about WTI oil

WTI Oil is a type of crude oil sold on international markets. 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” due to its relatively low weight and sulfur content. It is considered a high quality oil that is easily refined. It originates in the United States and is distributed through the Cushing hub, which is considered the “pipeline junction of the world”. It is the benchmark for the oil market and the price of WTI is often quoted in the media.

Like all assets, supply and demand are key drivers of the WTI crude price. As such, global growth can be a driver of increased demand and, conversely, weak global growth. Political instability, wars and sanctions can disrupt supply and affect prices. Decisions by OPEC, the group of major oil producing countries, are another key driver of the price. The value of the US dollar affects the price of WTI oil because oil is mostly traded in US dollars, so 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) influence the price of WTI crude oil. Inventory changes reflect fluctuating supply and demand. If the data shows a decline in inventories, it could mean increased demand pushing up the price of oil. Higher inventories may reflect increased supply, which is pushing prices down. The API report is published every Tuesday and the EIA the day after. Their results are usually similar and fall within 1% of each other 75% of the time. EIA data is considered more reliable because it is a government agency.

OPEC (Organization of the Petroleum Exporting Countries) is a group of 13 oil-producing countries that meet twice a year to jointly decide on production quotas for member countries. Their decisions often affect WTI oil prices. When OPEC decides to cut quotas, it can tighten supply and push oil prices up. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten other non-OPEC members, the most prominent of which is Russia.

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