Oil prices continued to rise on Wednesday, after falling below the $100 per barrel key level earlier this week. On Monday, WTI had fallen as low as $93.3 per barrel but climbed back up to $104.5 per barrel on Wednesday. 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 106.4 per barrel and further up at $118.3 per barrel.
Increasing geopolitical tensions and easing lockdown rules in China have spurred demand for oil in the past couple of days. Large releases from strategic stockpiles have failed to curtail rising oil prices, raising fears of an impending energy crisis. On Wednesday, the U.S. Energy Information Administration reported that US crude oil inventories had risen by 9.4 million barrels last week, but failed to curtail the rise in oil prices.
Reports of easing lockdown restrictions in Shanghai have raised expectations of recovering demand from China. China is the largest importer of crude oil and the strict Covid lockdowns had been reducing global oil demand. As the large economic hub in China re-opens though, oil demand has been pushed back up.
In addition, the crisis between Russia and Ukraine has been intensifying concerns of disruptions in oil distribution, supporting oil prices. On Wednesday, hopes for a resolution of the crisis between Russia and Ukraine were diminished, as Russian President Vladimir Putin announced that diplomatic talks with Ukraine are at a dead end.
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 of Russian oil. A new round of sanctions on Russia was also agreed upon by EU member states last week, targeting the energy sector for the first time, with a ban on coal imports from Russia worth €4bn a year.
The EU has held a high-level dialogue with OPEC in Vienna, to discuss the possibility of oil sanctions on Russia. The EU is still hesitant to enforce an embargo on Russian oil, as many of its member states, especially Germany, depend heavily on Russian oil imports. It was also reported that OPEC has warned the EU that it would be impossible to replace the 7 billion barrels per day of Russian oil exports, suspending the EU’s plans for bans on Russian oil.
Recent reports show that OPEC raised its output by only 57,000 barrels per day in March, as some of its African member countries have decreased their output and most of the production increase came from the Arab Gulf countries.
Last week, the International Energy Agency announced plans to release 120 million barrels from their emergency oil reserves, half of which will be released from U.S. stockpiles. The announcement has eased oil supply concerns, temporarily, but has failed to curtail the rise of oil prices, as oil demand grows.
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