- Oil prices got off to a strong start this week as traders prepare for the OPEC+ meeting scheduled for Thursday.
- OPEC+ has come under fire from Iranian government official Afshin Jawan over the recent drop in oil prices.
- US dollar index soars as President Trump threatens BRICS with tariffs, euro struggles due to France's fiscal strain.
Oil prices are in green territory as tensions rise ahead of Thursday's most important OPEC+ meeting by 2025. Before the rally, Iranian government official Afshin Jawan published an opinion piece pointing to OPEC+ as the cause of the current low prices and blaming the pigeon flock. The main point of the opinion piece was that OPEC+ has been driving up oil prices for too long by funding competitors to produce cheaper alternatives.
Afshin Jawan's statement sparked heated debate ahead of Thursday's online meeting, where OPEC+ is scheduled to meet on extending production curbs.
The US Dollar Index (DXY), on the other hand, measures the performance of the US dollar (USD) against a basket of currencies and is circulating in the market. The index rose after President Trump said over the weekend that he would impose tariffs on BRICS countries if they tried to replace the US dollar as their reserve currency.
The euro (EUR), the main currency in the DXY Basket, is on the verge of a collapse of the French government as early as this week after Marine Le Pen threatened to support a no-confidence motion against the current prime minister unless the government tabled one. It's a struggle because it's on the rise. Accept some budget requests. French Finance Minister Antoine Armand said on Bloomberg TV on Monday that France would not be taken hostage, but markets are starting to price in this political turmoil by punishing French debt.
At the time of writing, crude oil (WTI) is trading at $68.50 and Brent crude oil is trading at $72.35.
Oil news and market trends: ahead of Thursday
- Afshin Jawan, number two in Iran's delegation to OPEC+, published an opinion piece on November 26th that was picked up by Bloomberg on Monday. After years of production cuts, OPEC+ faces a supply glut largely of its own making. “This strategy of supporting prices effectively promoted supply increases outside the group, especially on the US side,” he said.
- Bloomberg reported on Sunday that Poland had shut down part of the Druzhba pipeline after discovering a leak, citing Polish media and the local fire brigade that responded to the leak report.
- OPEC+ is scheduled to meet online on Thursday to discuss how to curb production in 2025.
Oil technical analysis: Questions about what OPEC+ can do to change its current stance
Oil prices are stuck in a narrow range as the OPEC+ framework appears to be starting to unravel. A heated debate could take place on Thursday after Iran's pushback. Still, in terms of production curbs, OPEC+ has little ability to tweak its expectations, so the chances of oil prices falling further are greater than the chances of them rising.
On the upside, the two main resistances are the pivotal level of $71.46 and the 100-day simple moving average (SMA) of $72.01. The 200-day SMA of $76.18 is still a long way off, but could be tested if tensions intensify further. The pivotal level of $75.27 on the rally towards the 200-day SMA could still dampen the rally.
On the other hand, traders should focus on $67.12, the level that held the price in May and June 2023, to find the first support. If this breaks, the year-to-date low in 2024 will be $64.75, followed by the 2023 low of $64.38.
US WTI crude oil: daily chart
Frequently asked questions about WTI oil
WTI oil is a type of crude oil sold on the international market. WTI stands for West Texas Intermediate and is one of three main types including Brent and Dubai crude. WTI is also referred to as “light” and “sweet” due to its relatively low specific gravity and relatively low sulfur content, respectively. It is considered a high quality oil that is easy to refine. The product is sourced in the United States and distributed through the Cushing hub, considered the “pipeline crossroads of the world.” It is the oil market benchmark and the WTI price is frequently quoted in the media.
As with all assets, supply and demand are the main drivers of WTI oil prices. Therefore, global economic growth may be the driving force behind increased demand, and the converse is also true if global economic growth slows. Political instability, war, and sanctions can disrupt supply and affect prices. Decisions by OPEC, a group of major oil producing countries, are also a major factor in prices. Since oil is primarily traded in US dollars, the value of the US dollar affects the price of WTI crude oil. Therefore, when the US dollar weakens, oil becomes more affordable and vice versa.
The weekly oil inventory report published by the American Petroleum Institute (API) and the Energy Information Administration (EIA) influences the price of WTI oil. Changes in inventory reflect changes in demand and supply. If the data shows a decline in inventories, it could indicate an increase in demand, pushing up oil prices. Increasing inventories reflect increased supply and can push prices down. API reports are published every Tuesday, and EIA reports are published the following day. Typically, their results are 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 an organization made up of 12 oil-producing countries, which meets twice a year to collectively decide on production quotas for member countries. Their decisions often influence WTI oil prices. If OPEC decides to cut production, supplies could tighten and oil prices could rise. If OPEC increases production, it will have the opposite effect. OPEC+ refers to an expanded group that includes 10 additional non-OPEC countries, the most notable of which is Russia.
