Oil prices plummeted on Tuesday, with WTI price falling rapidly below the $103 per barrel support level and below the $100 per barrel psychological level, and reaching the $98 per barrel support before recovering a little. If the WTI price retreats, support can be found again near $98 per barrel, while resistance can be found near the $121.2 per barrel level and higher up at $130 per barrel.
Oil prices are under pressure by global recession concerns, outweighing tight supplies. On Tuesday, heightened global recession fears reduced the oil demand outlook, pushing oil prices down. Concerns that interest rate hikes could slow global economic growth, and reduce energy demand, have pushed oil prices down in the past couple of weeks. An increasing number of major Central Banks are moving towards a tighter fiscal policy to tame soaring inflation rates. Stalling economic growth combined with fiscal tightening gives rise to fears of recession, halting the ascend of oil prices.
Oil supplies, however, remain tight, providing support for oil prices. Many OPEC members continue to underperform, raising doubts about whether the organization can maintain its output goal, and adding to supply concerns. Sanctions against Russia limit Russia’s oil output, while unrest in Libya has led protestors to block the country’s main oil export ports.
Last week, OPEC+ members discussed output goals for August but refrained from setting a goal for September’s production. 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. Further sanctions on Russian oil exports have been discussed by G7 leaders, possibly by enforcing a price cap on Russian oil exports. In addition, the latest package of EU sanctions against Russia includes a ban on Russian oil imports that will effectively reduce EU oil imports from Russia by 90% by the end of the year and end the EU’s dependency on Russian oil.
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