Oil prices rallied on Monday, with WTI prices climbing above $110 per barrel. If the WTI price retreats, support can be found further down near $103 per barrel, while resistance can be found near the $121.2 per barrel level and higher up at $130 per barrel.
Oil prices started to recover on Monday, amid concerns over tight supplies. 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.
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 demand outlook has increased, as the zero-Covid lockdown in Shanghai has ended, increasing demand outlook and boosting oil price. It seems however that Covid restrictions are not over in China, creating uncertainty in oil demand. China is the largest importer of crude oil and Covid lockdowns have dampened oil demand, pushing prices down.
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