Oil prices surge on tight supply outlook

Oil prices dipped in early trading on Tuesday, with WTI price bouncing off the $88.8 per barrel support. Oil prices surged later in the day, rising above $91.0 per barrel. If WTI price declines, it may encounter support near $88.8 per barrel, while resistance may be found near $93.0 per barrel.

Oil prices were buoyed on Tuesday by fears of tight oil supply. The Energy Information Administration is due to release US crude oil inventory data on Wednesday. Reports of reduced oil supply boosted oil prices.

Last week Russian authorities decided to restrict diesel and gasoline exports to stabilize domestic fuel prices. Russia, however, decided to relax the fuel ban on Monday. Russia lifted restrictions on fuel used as bunkering for some vessels and on diesel with high Sulphur content. 

The oil demand outlook has declined as the Fed delivered a hawkish message last week hinting at further tightening. FOMC members unanimously voted to keep interest rates unchanged at a target range of 5.25% to 5.50%. The Fed decided to pause rate hikes but that does not necessarily mean it has reached its rate ceiling. The Fed policy statement following the meeting left the door open for further rate hikes. Market odds of another rate hike within the year are increasing, although it is clear that the Fed’s future policy direction will be data-driven. Even if the Fed has reached its interest rate ceiling, rates are likely to stay high for longer to bring inflation down. 

Deterioration in China’s economic outlook is keeping oil prices down, however. Uncertainty over China’s economic recovery has put a cap on oil prices. China is the world’s largest importer and a weaker Chinese oil demand outlook has put pressure on oil prices. China’s economy showed signs of improving this week, though, boosting oil prices.

TRADE WTI

The content provided in this material and/or any other material that this content is referred to, whether it comes from a third party or not, is for information purposes only and shall not be considered as a recommendation and/or investment advice and/or investment research and/or suggestions for performing any actions with financial products or instruments, or to participate in any particular trading strategy and cannot guarantee any profits. Past performance does not constitute a reliable indicator of future results. TopFX does not represent that the material provided here is accurate, current, or complete and therefore shouldn't be relied upon as such. This material does not take into account the reader's financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of TopFX, no reproduction or redistribution of the information provided herein is permitted.

Written by:
Myrsini Giannouli

Share the article: