Oil was once again in the eye of the hurricane. Crude oil has been very volatile since the market opened.
The price of West Texas Intermediate (WTI), came to be above the area of 79.00 USD per barrel, however it has had a 1.80% decline, standing in the area of 76.60 USD per barrel.
Traders have been watching different variables that have interfered in the price, such as conflicts between certain countries in different regions, monetary policy announcements, weather in different areas of the United States and macroeconomic indicators to be published.
For starters this week crude oil was quite volatile due to concerns about increasing supply disruptions in the Middle East. This panic grew following a drone attack on U.S. forces in Jordan over the weekend.
According to President Joe Biden, this attack was carried out by Iranian-backed militants. The attack resulted in the deaths of three American militants and marks the first deadly attack on U.S. forces since the beginning of the Israel-Hamas conflict. Although Iran has denied its involvement, the situation is escalating due to concerns about a possible confrontation between Iran and the United States, which could lead to disruptions in oil supplies throughout the region.
Similarly, there is no end to the conflict between Russia and Ukraine. Last week, Ukrainian drones attacked an oil refinery owned by Rosneft in southern Russia. According to a source in Kiev, the Ukrainian Security Service carried out the attack and plans to continue striking facilities that supply fuel for the Russian intervention.
We could also say that today’s drop may have been due to concerns about the weakening property sector in the world’s second strongest economy, China, which has raised concerns about oil demand. Also, a Hong Kong court added to the problem when it ordered China’s Evergrande to be liquidated.
Another cause of the unstable price is the winter weather in Texas and North Dakota that has affected oil production in the United States, reducing production by millions of barrels per day. It is forecast that the industry will need several weeks to restore production to normal levels due to the extreme weather conditions in which they are currently operating.
Likewise, WTI volatility could also be attributed to the uncertainty regarding whether or not the Federal Reserve (FED) will lower interest rates this week. On January 31, 2024, the institution will release this data and market traders are very attentive to this publication. Analysts forecast that rates will remain the same as last time’s data, 5.50%.
In addition to the above data, other important data will also be released on Friday of this week. Investors will be watching for the announcement of the U.S. Non-Farm Payrolls and the U.S. Unemployment Rate. These macroeconomic indicators are highly regarded as they signal the stability of the U.S. labor market.
In conclusion, for some time now, oil prices have been going through very unstable moments due to factors that do not allow investors to have a clearer forecast of what may happen with crude oil.