Oil prices plummeted on Thursday, with WTI price testing the $82.2 per barrel support. If the WTI price declines, it may encounter further support near $76.5 per barrel, while resistance can be found at $90.3 per barrel and further up at $97.8 per barrel.
A missile landing in Poland earlier in the week threatened to bring the Russia-Ukraine war to a wider area and triggered an emergency NATO meeting on Wednesday. NATO Secretary General Jens Stoltenberg stated after the conclusion of the meeting that the deadly missile likely came from Ukraine’s air defense system. NATO’s statement helped dissipate rumors that the errant missiles were an attack against Poland by Russia. Geopolitical tensions eased on Thursday, putting pressure on oil prices.
In addition, oil flows on the Druzhba pipeline from Russia to Hungary were resumed on Wednesday after being temporarily suspended, as they had sustained damage in Moscow’s latest assault on Ukraine.
Surging Covid cases in China are also pushing oil prices down. The country continues to grapple with rising Covid cases, with heavy restrictions impacting economic output. Beijing and other major Chinese cities reported record coronavirus cases this week, dashing expectations of ending lockdowns. On Friday, some restrictions were lifted and oil prices spiked upwards on a positive oil demand outlook. Health authorities in China, however, seem committed to keeping the strict lockdowns and quarantines in place for the time being. The uncertainty over oil demand in China has influenced oil prices considerably as China is the world’s largest energy importer and zero-Covid restrictions severely limit oil demand.
Oil prices gain support from the dollar’s weakness, as US PPI inflation data came out softer than expected on Tuesday. Cooling US inflation has reduced Fed rate hike odds, diminishing global recession concerns. October’s US inflation print came below expectations, bringing the dollar down. Market expectations of future rate hikes were considerably trimmed after last week’s inflation report and were further diminished after Tuesday’s inflation print. Aggressive rate hikes stifle economic activity, undercutting oil demand and putting pressure on oil prices.
Concerns of political uncertainty in the US caused market turmoil last week, putting pressure on oil prices. Concerns that political instability may tip the country into recession, reducing oil demand, have sent oil prices plummeting. The results of the elections were close, with the votes being tallied for a week. Republicans eventually wrested control of the House from the Democrats, winning the elections with a narrow majority.
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