• Wed. May 22nd, 2024

WTI Price Analysis: Oil Benchmarks Soar as Us Output Falls

Leon Kramer

ByLeon Kramer

Aug 22, 2023

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  • The West Texas Intermediate (WTI) experienced a notable increase of over 1% on Friday, encountering a level of resistance in the vicinity of $81.30, surpassing the 20-day Simple Moving Average (SMA).
  • The number of oil and natural gas rigs in the United States has experienced a consecutive decline for the sixth successive week.
  • The neutral trading conditions of the USD facilitated the upward movement of black gold.
  • The potential constraints on the WTI’s upward trajectory may arise from China’s current economic challenges in finance.

Towards the week’s conclusion, the West Texas Intermediate (WTI) barrel exhibited an upward trajectory, surpassing the 20-day Simple Moving Average (SMA) of $81.30, registering gains exceeding 1%.

On Friday, the United States released a report indicating a decline in the weekly Baker Hughes Rig Counts, which decreased from the previous count of 525 to 520 in the week ending on August 18. From a broader perspective, the data above indicates a decline in oil production within the United States. This can intensify the existing global supply constraints, exerting upward price pressure.

With due consideration, the delicate economic circumstances prevailing in China could impose constraints on the upward trajectory of WTI. On Thursday, Evergrande, a prominent Chinese real estate corporation, initiated bankruptcy protection proceedings in a United States court. This development has engendered a prevailing pessimistic market sentiment driven by concerns surrounding the potential for a worldwide contagion effect.

It is pertinent to observe that China holds the distinction of being the foremost global importer of oil. Consequently, a weakened Chinese economy would reduce energy demand, constraining the potential for upward movements in the West Texas Intermediate (WTI) crude oil price.

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Furthermore, the United States Dollar (USD), as measured by the DXY index, experienced a notable surge, reaching a daily peak of 103.60. This represents its highest level since the middle of June. The impetus behind this upward movement can be attributed to the prevailing bullish sentiment exhibited by market participants towards the Federal Reserve (Fed), and the minutes of the Federal Open Market Committee (FOMC) meeting held on Wednesday, July, revealed that committee members expressed apprehension regarding the potential inflationary pressures on the upside.

Furthermore, they were willing to consider implementing an additional interest rate hike within the current cycle. In the forthcoming sessions, the potential impact of elevated interest rates and a strengthened United States dollar on oil prices should be noticed.

WTI Levels to Keep an Eye On

Based on the analysis of the daily chart, the technical outlook for the West Texas Intermediate (WTI) exhibits a state of neutrality with a slight inclination toward bullish sentiment. This inference is drawn from the discernible resurgence of bullish momentum, as the bulls are progressively regaining control and advancing.

The Relative Strength Index (RSI) exhibits an ascending trajectory surpassing its midline, indicating a prevailing bullish sentiment. Conversely, the Moving Average Convergence (MACD) manifests diminished red bars, suggesting a weaker trend.

Furthermore, it is worth noting that the pair above currently resides below the 20-day Simple Moving Average (SMA) while maintaining a position above the 100 and 200-day SMAs. This configuration suggests that the prevailing market sentiment favors the buyers, indicating a broader control over the price dynamics.

The support levels for the given asset are observed at $82.00, $83.65, and $84.80. 

The resistance levels currently observed in the market are as follows: $81.20, which corresponds to the 20-day Simple Moving Average (SMA); $80.00; and $79.00. 

The Daily Chart for WTI

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Leon Kramer

Leon Kramer

Leon Kramer, a renowned financial author, enlightens Main Forex News readers with his deep understanding of currency markets. His years in global finance, combined with an intuitive grasp of trends, delivers insightful, up-to-the-minute foreign exchange analysis.

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