Oil prices rose sharply on Monday, with WTI climbing above the $198 per barrel level. If the WTI price declines further, it may encounter support at $90 per barrel, while resistance can be found near the $105 per barrel level and higher up at $112 per barrel.
Heightened global recession fears have recently reduced the oil demand outlook, putting pressure on oil prices. Concerns that interest rate hikes could slow global economic growth reducing energy demand have pushed oil prices down. Stalling economic growth combined with fiscal tightening and soaring inflation gives rise to fears of recession, halting the ascend of oil prices.
Increased risk appetite on Monday though, pushed oil prices up as rate hikes have been already priced in by markets. The Fed is expected to raise its interest rates this week to tackle skyrocketing US inflation. The outcome of the much-anticipated Fed meeting on the 27th is expected to affect oil prices, with the odds in favor of a 75 bps Fed rate hike.
Oil prices dropped on Friday after the EU announced it would modify sanctions against Russia. Under the new sanctions, Russian companies will be allowed to ship oil to third countries, mitigating the risks of a global energy crisis.
Energy pressures in Europe are intensifying supply fears though, providing support for oil prices. Nord Stream 1, Germany’s biggest gas pipeline, was shut off for routine maintenance recently, which was delayed under various pretexts. Gas supply via this pipeline was finally resumed late last week. On Monday however, reports that the pipeline runs at 20% capacity further exasperated the EU’s energy crisis, pushing oil prices up.
Oil supplies remain tight, supporting oil prices, with the bans on Russian oil keeping oil prices high. In its latest meeting, OPEC+ maintained its output policy, raising its output by approximately 648,000 barrels a day. Many OPEC members continue to underperform though, raising doubts on whether the organization can maintain its output goal.
Uncertainty over China’s oil demand is causing fluctuations in oil prices. China is the largest importer of crude oil and Covid lockdowns have dampened oil demand, pushing prices down. Reports of massive Covid testing in China and renewed restrictions have reignited fears of extensive lockdowns, pushing oil prices down.
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Written by:
Myrsini Giannouli
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