Oil prices remained steady on Wednesday with WTI trading between $100 and $103 per barrel. If the WTI price drops, support can be found at the $94.5 per barrel level and further down at the $90 per barrel level, while resistance can be found near $118.3 per barrel.
Oil prices are especially volatile, as competing factors affect oil supply and demand. The IMF meetings last week have pointed to a marked reduction in global economic growth, signaling a fall in the demand for oil and the IMF has cut its global growth forecast.
The crisis between Russia and Ukraine however, has been intensifying concerns of disruptions in oil distribution, supporting oil prices. Continued Russian hostilities against Ukraine provide support for the price of oil, as western allies discuss fresh sanctions on Russia this week, while the Russian President, Vladimir Putin, cut off gas supply on Poland and Bulgaria, intensifying fears of an energy crisis in Europe.
The US has already banned all oil and gas imports from Russia, with as many as 3 million barrels per day of Russian crude oil potentially removed from the market as a result of sanctions and of boycotting on Russian oil.
The EU is still hesitant to enforce an embargo on Russian oil, as many of its member states, and especially Germany, depend heavily on Russian oil imports. OPEC has warned the EU that it would be impossible to replace the 7 billion barrels per day of Russian oil exports. The EU is expected to enforce fresh sanctions on Russia this week, but it is doubtful that oil imports will be targeted directly, as most EU member states are in favor of gradually weaning off Russian oil imports.
US Crude Oil inventories released on Wednesday showed that 700,000 barrels were added to US reserves this week. This is a marked increase compared to last week’s reduction by 8 million dollars but has not affected oil prices significantly.
Covid restrictions in China have raised fears of a large decrease in global oil demands. China is the largest importer of crude oil and the strict Covid lockdowns had been reducing global oil demand. The large economic hub in Shanghai has been in a zero-Covid lockdown for weeks now and there are fears that China’s capital city of Beijing will soon follow with strict Covid restrictions.
On Tuesday however, China’s Central Bank announced plans to support the country’s weakening economy. The expected economic stimulus boosted demand for oil and prices bounced back up.
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