The return of Donald Trump to the White House has introduced a new dynamic to the trading environment, impacting global oil markets. In the past two weeks, the Biden administration targeted over 100 tankers and two Russian oil producers, further adding complexity to an already volatile market. Amid these developments, the Organization of the Petroleum Exporting Countries (OPEC)—a group of 12 oil-producing nations—continues to play a critical role in determining global oil supply and prices. Their strategic meetings, held twice a year, set production quotas for member countries, directly influencing market trends.
On Monday, the gold price extended its decline below $2,700 during the Asian session. Meanwhile, the US market will remain closed in observance of Martin Luther King Jr. Day, likely resulting in thin trading. This pause in trading activity may provide market participants with an opportunity to assess recent geopolitical events and their implications for future market movements.
OPEC's decisions on production quotas can significantly impact oil prices. When the organization lowers quotas, it tightens supply, often pushing prices upward. Conversely, increasing production can ease supply constraints, potentially lowering prices. As such, OPEC's biannual meetings are closely watched by investors and market analysts.
The recent ceasefire between Hamas and Israel, marked by an exchange of hostages and prisoners, adds another layer of geopolitical tension affecting global markets. After 15 months of conflict, this development may influence oil prices as stability in the region often correlates with shifts in energy markets.
West Texas Intermediate (WTI), one of three major types of crude oil, is particularly sensitive to these geopolitical and economic factors. The weekly oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Administration (EIA) play a crucial role in shaping WTI prices. These reports typically produce similar results, aligning within 1% of each other 75% of the time. However, EIA data is generally considered more reliable due to its status as a government agency.
The value of the US Dollar also exerts a significant influence on WTI crude oil prices. As the dollar appreciates, oil becomes more expensive for holders of other currencies, potentially dampening demand and pressuring prices downward.
With the US market holiday resulting in thin trading volumes, participants are likely to focus on the upcoming API and EIA reports to gauge inventory levels and potential price movements. The interplay between these reports and geopolitical developments will be critical in determining the direction of WTI crude oil prices in the coming weeks.