2022年11月2日

Insights

US Oil: Is it about to blow up?

By Paul Reid, Managing Editor
By Paul Reid, Managing Editor

Crude oil prices fell below $80 in week 43, and commuters all over the world saw hope of relief at the pumps. But that short-term bearish run came to a quick end, and it now seems it’s a little too early for optimism.

US Oil is already crawling toward the $90 mark, and there are three very influential things happening right now. Politics behind the chart patterns are about to make oil trading a tricky but exciting asset worth watching in the coming weeks. But before you hit the buy or sell button on US Oil, consider who is pulling the strings and why.

Biden behind the barrels

Currently, the U.S. presidency is democratic, and the U.S. Senate is marginally democratic too. This means whenever the Biden administration wants to pass laws, they have a good chance of succeeding. But here come the midterm elections, and the Democrats need to put on a good show.

In the last three months, Biden and the Federal Reserve, has done a lot to reduce the prices of oil with the aim to lower the prices at the pumps… and they’ve been telling this to every microphone and camera pointing their way. 

But will his initiatives make a difference? After all, there's still a vast supply and demand problem. Before the Russian/Ukraine conflict, Russian oil exports to the EU and UK were steady at 2.6 million barrels per day. Today, that has fallen to 1.7 million. But Russia is not the only country affecting the global supply and demand.

Strategic Oil Reserves

Strategic Oil Reserves are set aside and can only be used in times of war... usually. That Biden is talking about releasing some of those reserves indicates the gravity of the situation. 

Last week, the Biden administration announced plans to release up to 15 million barrels of oil from the U.S. Strategic Reserves. At first glance, this might seem like positive news that could lower prices, but the reality is somewhat less impressive. 

Saudi Arabia alone produces over 10 million barrels per day for OPEC… every day! Biden’s 15 million barrels are nothing more than a publicity stunt, and he hasn’t done it yet. What’s he waiting for? Consider the words all the Tier-1 media are using. Biden has “announced” the release of strategic reserves. “announced.”

The U.S. is already on shaky economic ground, and releasing 15 million barrels when the price is low would be a big loss for the U.S. After all, nobody buys high and sells low. Which means we’ll need to see a significant rise in oil prices before America will consider releasing its tiny reserves into the oil market.

The Organization of the Petroleum Exporting Countries

Founded in 1960 with headquarters in Austria, OPEC is the world’s biggest oil producer. Currently, OPEC production is around 31 million barrels per day. Biden’s 15 million is a drop in the ocean when we look at the big picture.

OPEC has all the keys to every door. Even oil companies are at their mercy. The 13 nations won’t let prices stay low for long, and there’s nothing Biden or anyone can do to stop them.

The common tactic used for decades by OPEC and the big oil companies is to simply pause the pumps. By producing less oil, the scarcity affect raises the price per barrel. We all felt this years big cut while filling our tanks. When OPEC strangles the supply, every nation suffers withdrawal symptoms, stations run dry, and countries cave in to higher prices.

OPEC then opens the taps to serve the global addiction, and the world sighs in “expensive” relief. Today, OPEC supplies about 30% of global oil needs, and, for the most part, they have monopoly on that dwindling energy source.

Trading US Oil in Q4 2022

Crude oil chart
Crude oil chart

So which way is US Oil going in the coming weeks? Q1 of 2022 saw a long rally that started at $66 per barrel and maxed at $124. A truly epic bull. But oil went into decline in June and only now shows signs of a reversal. Will Crude Oil rebound? How high might it go?

Summarizing three major factors, a bullish forecast seems obvious.

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    From a technical analysis perspective, “buying the dip” is a likely strategy for US Oil traders right now.

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    America’s “Midterm motivated grip” on prices will relax soon after the U.S. elections are over, which is just days away.

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    OPEC will start squeezing to bring prices back up, if they haven’t already.

Now imagine what could happen to the oil market if all three price strategies collide? Volatility may well be epic, with prices as high as $130 in the coming weeks, and daily price swings large enough to wipe out trading accounts are a real risk as big investors jump in and out.

If you’re trading US Oil, you’d be wise to take advantage of every protection feature that Exness offers. From Price Volatility Protection to Custom Stop Out Level, you’ll need every tool Exness offers to trade US Oil. Check the US Oil chart today, and see if a reversal is underway. Be ready for the bull, but be wary of its horns.

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