Oil prices jumped above $100 per barrel on Monday, with WTI climbing above $102 per barrel, after dropping to $90.5 per barrel last week. If WTI declines again, it may encounter support near $98 per barrel and further down at $90 per barrel, while resistance can be found near the $105 per barrel level and higher up at $112 per barrel.
The US administration has been trying to secure a deal with Saudi Arabia to increase oil output and bring down oil prices. Chances of success were slim though, as even last week, a US official told Reuters that an immediate Saudi oil output boost was not expected. US President Joe Biden visited the country in an attempt to achieve assurances of higher oil output, but on Monday, reports that his attempts were fruitless, drove oil prices down.
Energy pressures in Europe are also providing support to oil prices. Nord Stream 1, Germany’s biggest gas pipeline, has been shut off for maintenance until the 21st of July, raising fears that Russia might use this pretext to cut off completely gas supplies from this pipeline. Moreover, Gazprom announced on Monday that it could not guarantee gas supplies to certain countries, due to ‘extraordinary’ circumstances, further exasperating the EU’s energy crisis.
Heightened global recession fears have recently reduced the oil demand outlook though, putting pressure on oil prices. Concerns that interest rate hikes could slow global economic growth reducing energy demand have pushed oil prices down. The Fed is expected to raise its interest rates again considerably this month to tackle skyrocketing US inflation, and a 75 bps Fed rate hike is priced in by markets. Stalling economic growth combined with fiscal tightening and soaring inflation gives rise to fears of recession, halting the ascend of oil prices.
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.
Oil supplies remain tight, however, supporting oil prices. In its latest meeting, OPEC+ maintained its output policy and kept its production goals for August to the same levels agreed in its previous meeting, raising its output by approximately 648,000 barrels a day. It remains to be seen, however, whether the bans on Russian oil will allow the organization to reach its output quotas.
Many OPEC members continue to underperform, raising doubts about whether the organization can maintain its output goal, and adding to supply concerns. Last week, OPEC+ data showed that the organization produced 24.8 million barrels per day of crude oil in June, with production falling 1 million BPD short of the target levels.
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