Oil prices edged higher on Monday and WTI touched $89 per barrel. If the WTI price declines, it may encounter further support near $66 per barrel, while resistance can be found near $90.5 per barrel and higher up at the $98 per barrel level.
Investors’ appetite for risk grew on Monday, as US inflation data later in the week are expected to show that inflationary pressures are finally easing. Oil prices received a boost, as a risk on sentiment signifies increased demand for oil.
Supply concerns also propped oil prices, as new obstacles to the Iran nuclear deal raised doubts on whether Iran is committed to the deal. If the deal goes through, it can add more than a million barrels of oil per day to the global market providing some relief to oil demand.
OPEC+ members agreed last week to cut down production by 100,000 barrels per day to offset the potential return of Iranian barrels to oil markets. The organization has seen oil pricing slipping over the past month and has decided to curtail oil production to keep oil prices high. OPEC+ members strive to defend the $100 per barrel key level, despite mounting global recession risks.
Over the past few months, Russia’s war against Ukraine has destabilized oil markets. G7 finance ministers have agreed to impose a cap on Russian oil prices in an attempt to reduce Russia's ability to fund its war against Ukraine, which would potentially drive oil prices lower. Russian President Vladimir Putin threatened last week to retaliate by halting oil and gas exports if price caps were imposed.
Rising odds of aggressive rate hikes, however, push oil prices down. Severe rate hikes stifle economic activity fuelling recession fears. Last week, the ECB performed its largest rate hike ever, increasing its interest rate by 75 bps. The global economic slowdown and recession concerns are decreasing the oil demand outlook, putting pressure on oil prices.
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