Oil makes new yearly high on the back of NFP print and Middle East crude export cuts - FXStreet

Oil makes new yearly high on the back of NFP print and Middle East crude export cuts

- Oil (WTI) price prints a new yearly high.
- US Dollar slips ahead of a key US jobs report.
- Baker Hughes Oil rig count data due this Friday.

Oil price keeps printen new yearly highs, even in the aftermath of the US jobs report and official numbers confirming that crude exports out of the Middle East are declining quick. Though still officially unconfirmed, is that Saudi Arabia and Russia are due to announce that they will do more in terms of supply control. Riyadh is expected to extend its 1 million barrel-per-day curb. Meanwhile, Russian Deputy Prime Minister Alexander Novak mentioned that a 300,000 barrel cut per day will be materialising this month.

This shakes up the supply side in oil, meaning that market participants need to dig deeper into their wallets. At the beginning of the week, Crude was just barely below $80, while it currently trades above $83. A new yearly high could be in reach, depending on the official announcements of both Saudi Arabia and Russia in the coming days.

At the time of writing, Crude Oil (WTI) price trades at $84.25 per barrel and Brent Oil at $87.68

Oil news and market movers

- Kuwait is being added to the list of countries where exports slumps, with levels hitting a 6-year low from the Persian Gulf state..
- Saudi Arabia Crude export numbers reveal a substanial cut in production to only 5.5 million barrels per day in August, from 6.2 million in July and 6.6 in June.
- The refinery outage at Garyville, Louisiana, is solved and back online.
- Shanghai weekly medium Sour Crude Stockpiles dropped by 15%.
- India refineries are dealing back with traditional suppliers as the lucrative cheap Russian oil supply looks to be abating.
- The key US jobs report, or Nonfarm Payrolls (NFP), came out at 12:30 GMT. With a print in change Nonfarm Payrolls of 187k vs 170k expected, the US job market is still in good shape. The downward revision from the previous number even makes it a positive increase month-over-month. Average Hourly Earnings are declining for the month from 0.4% to 0.2%. The demandside of the US economy thus does not look to be stalling anytme soon and might underpin current price levels in Crude.
- Final confirmation from the earlier move on the back of the US Nonfarm Payrolls will come from the ISM Manufacturing PMI for August, which is expected to increase slightly from 46.4 to 47.0. Despite the rise, this would still signal a contraction in US factory activity. The Employment Index is expected to stay broadly steady from 44.4 to 44.2. The New Orders Index is forecast to fall from 47.3 to 46.3;, and the Prices Paid Index is seen increasing from 42.6 to 43.9.
- Data from the Baker Hughes US Oil Rig Count is expected to close off this week at 17:00 GMT. The previous number was at 512, and a lower number could possibly become an 18-month low.
- Equity markets are mixed this Friday as investors await more guidance from the US jobs report on Friday.

Oil Technical Analysis: Crude gets tailwind from NFP

Oil price has snapped its losing streak with a fourth consecutive day of gains this week. Crude is flirting with a new yearly high. In case supply cuts are higher than expected, with more drawdowns in strategic stockpiles in the coming weeks, Oil might be heading back to $92.

On the upside, $84.28, the high of August 10, is the one to beat in order to have that bullish breakout confirmation. Should WTI continue to rally on the back of lower supply and more demand, not many elements could be standing in the way of reaching that blue line at $92.80. Of course, the $90 big figure psychological level needs to be faced first.

On the downside, a temporary bottom is being formed around $77.50, which acted 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 Oil FAQs

What is WTI Oil?

WTI Oil is a type of Crude Oil sold on international markets. The 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” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.

What factors drive the price of WTI Oil?

Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.

How does inventory data impact the price of WTI Oil

The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.

How does OPEC influence the price of WTI Oil?

OPEC (Organization of the Petroleum Exporting Countries) is a group of 13 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Follow us on Telegram

Stay updated of all the news

Recommended content

Editors’ Picks

EUR/USD rises above 1.0850 after US NFP data

EUR/USD gained traction and climbed above 1.0850 on Friday. After the data from the US showed that the Unemployment Rate rose to 3.8% in August despite an increase of 187,000 in Nonfarm Payrolls, the US Dollar started to weaken and helped the pair push higher.
EUR/USD News

GBP/USD rises toward 1.2700 on renewed USD weakness

GBP/USD gathered bullish momentum and advanced toward 1.2700 on Friday. The data from the US showed that wage inflation softened slightly in August, while the Unemployment Rate rose to 3.8%, making it difficult for the USD to find demand and supporting the pair.
GBP/USD News

Gold advances to multi-week highs above $1,950

Gold price turned north and rose to its strongest level in a month above $1,950. The benchmark 10-year US Treasury bond yield turned negative on the day below 4.1% after the US jobs report, which showed that the Unemployment Rate rose to 3.8%, and provided a boost to XAU/USD.
Gold News

Chainlink price begins recovery with successful completion of SWIFT experiment across multiple blockchains

Swift, the interbank messaging giant, announced a collaboration with Chainlink back in June. As of August 31, Swift released a report and said that the experiment to transfer value across multiple blockchains was successfully completed.
Read more

NVDA stock price gains following August Nonfarm Payrolls

Nvidia’s (NVDA) stock price edged up 0.7% in Friday's premarket after US Nonfarm Payrolls for August arrived at 187K. That figure was higher than the 170K expected but lower than the 200K that the market did not want.

Read more