Oil prices gained strength on Monday, boosted by signs of China’s reopening. WTI price surged to $76.6 per barrel in early trading but pared some gains later in the day, dropping to $74.5 per barrel. If the WTI price declines, it may encounter support near $70.2 per barrel, while resistance may be found near $81.4 per barrel.
Oil prices climbed on Monday on increased optimism about China’s economic reopening. China opened its borders this week, fuelling hopes that the country is gradually ending its strict Covid policy. China is the world’s largest energy importer and prolonged lockdowns have dampened oil demand. The Chinese government eased some of its strident Covid regulations recently, abandoning its zero-Covid policy. China’s economy, however, has suffered from prolonged lockdowns and the country’s debt has ballooned over the past few years. China’s weak economy is raising concerns over the demand outlook for oil, pushing prices down.
The global economic slowdown and recession concerns are decreasing the oil demand outlook, however, putting pressure on oil prices. International Monetary Fund Director Kristalina Georgieva has warned that a third of the world may face recession this year, stressing that the economy of the US, China, and the EU is slowing simultaneously.
Aggressive rate hikes stifle economic activity fuelling recession fears. Several major Central Banks, such as the US Federal Reserve, the ECB, and the BOE raised interest rates significantly over the past year, raising concerns that poor economic outlook and looming recession will reduce oil demand.
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