Oil prices rallied last week and continued to rise on Monday and early on Tuesday, with WTI climbing above $121 per barrel for the first time in over two months. Oil prices plummeted later on Tuesday though, with WTI falling as low as $116 per barrel. On Wednesday, oil prices remained high, with WTI fluctuating around the $117 per barrel level. If the WTI price drops again, support can be found at $110 per barrel and further down at $94.5 per barrel, while resistance can be found near $118 per barrel and $121 per barrel.
EU members have agreed on a new package of sanctions against Russia, including a ban on Russian oil imports. Several EU members, such as Hungary, have been opposing the plan, as they depend heavily on Russian oil imports. The European Council agreed on a compromise on Tuesday, allowing temporary Russian oil flows to Hungary, Slovakia, and the Czech Republic. This plan will effectively reduce EU oil imports from Russia by 90% by the end of the year. Oil prices spiked after the announcement of the ban on Tuesday, amid supply worries.
The oil demand outlook has increased, as the extended Covid lockdown in Shanghai ended on Wednesday and the large commercial hub has resumed its operations. China is the largest importer of crude oil and Covid lockdowns have dampened oil demand, pushing prices down. As Covid cases are starting to fall in China, however, oil prices are climbing back up. Global recession fears are rising, however, checking oil price rally. The economy in China has taken a big hit from the prolonged Covid lockdowns.
OPEC+ is going to meet on Thursday to set production quotas for July. High volatility in oil prices leading up to the meeting is expected, as well as after the announcement of the meeting outcome. It is reported that OPEC+ production fell short of its output goals last month, limiting supply and pushing prices up.
Thursday’s meeting in the wake of the EU ban on Russian oil imports is crucial. There are reports that OPEC is planning to exempt Russia from its production output goals as a result of the embargo and the war with Ukraine. Russia is the world’s third-largest oil producer and exclusion from the production deal would allow other members to raise their production quotas.
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