Oil prices rallied on Monday, with WTI price climbing to $73.9 per barrel, after dropping to a yearly low last week. If the WTI's price continues to retreat, it may encounter further support at $62.6 per barrel, while resistance may be found near $82.9 per barrel.
Oil prices dropped last week to levels seen before the war in Ukraine on re-ignited global recession concerns. Supply concerns boost oil prices on Monday, however. A Canadian pipeline at Keystone was shut down last week after an oil spill and repairs to the pipeline are taking longer than expected, boosting oil prices.
Further signs of China’s economic reopening increased the oil demand outlook on Monday. The Chinese government eased some of its strident Covid regulations last week, abandoning its zero-Covid policy. On Monday, Chinese authorities relaxed even more of the harsh Covid restrictions. 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.
Russian President Vladimir Putin has threatened to cut production and refuse to sell oil to any country imposing a Russian oil price cap. G7 leaders have agreed to enforce a price cap of $60 per barrel, which is slightly lower than the current market level. Oil prices plummeted since the announcement of the Russian oil cap, however, since markets were pricing in a tighter price limit. Fears that the price cap would reduce global crude supplies have prompted a wave of precautionary buying of oil in the past couple of months, driving oil prices up.
OPEC+ members agreed to continue oil production cuts into the next year to boost oil prices. The organization decided to curtail oil supplies by 2 million barrels per day, maintaining its previous decision made in October. OPEC’s oil production cuts are set to run throughout 2023, although the group stated that they would address market developments if necessary.
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