USOIL Consolidates After Russian Production Cut & US SPR Sale Announcements

  • USOil
    (${instrument.percentChange}%)

USOIL Analysis

Russia announced on Friday a reduction of 500,000 barrels/day in its oil production next month, as it may have encountered difficulties following Western price caps. Russia does not sell oil to countries that apply (directly or indirectly) those limitations and Deputy PM Novak accused the West for interfering in the market. [1]

The news sent oil prices higher on Friday, but they came under pressure at the start of this week, as the US Department of Energy said it will sell 26 million barrels of crude oil from the Strategic Petroleum Reserve (SPR) in Fiscal Year 2023. [2]

Markets now await this week's monthly oil reports from the International Energy Agency (IEA) and the Organization of the Petroleum Exporting Countries (OPEC), for more insights as to the state of the oil market. In last month's report, IEA had once again upgraded the 2022 oil demand growth to a record of 101.7 million barrels/day, with nearly half of the gain coming from China "following the lifting of its Covid restrictions". [3]

Furthermore, investors keenly await today's January CPI Inflation report from the US, which can affect the Fed's decision-making and the path of USOil, along with more releases this week. In December, both the headline and the core readings had eased to the lowest in over a year. Chair Powell has acknowledged the progress and spoke again last week of the "disinflationary process" that has begun, but warned that it has a "bumpy" and "long way to go". [4]

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USOil tries to stay above the EMA200 and the 38.2% of the November high/December low drop, which keeps the toad open to 84.70, but 90.36 seems distant.

Previous visits above the aforementioned 38.2% Fibonacci have proved short-lived and the recent market repricing around the Fed's terminal rate poses headwinds. This maintains risk for a return back to the broader 72.23-70.06 region, although sustained weakness below this area continues to look tough.

Nikos Tzabouras

Senior Financial Editorial Writer

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 14 Feb 2023 http://government.ru/en/news/47756/

2

Retrieved 14 Feb 2023 https://www.energy.gov/ceser/articles/doe-issues-notice-congressionally-mandated-sale-purchase-crude-oil-strategic

3

Retrieved 14 Feb 2023 https://www.iea.org/reports/oil-market-report-january-2023

4

Retrieved 14 Jul 2024 https://www.youtube.com/watch

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