Oil prices rebounded on Tuesday, after falling below the $100 per barrel key level. On Monday, WTI had fallen as low as $93.3 per barrel but climbed back up to $101.5 per barrel on Tuesday. If the WTI price drops, support can be found at the $94.5 per barrel level and further down at the $90 per barrel level, while resistance can be found near 106.4 per barrel and further up at $118.3 per barrel.
In the past few days, oil prices had been pushed down as oil demand had decreased due to the Covid lockdown in China, while on the supply side, increases in output and large releases from stockpiles are easing fears of an impending energy crisis.
On Tuesday however, reports of easing lockdown restrictions in Shanghai have raised expectations of recovering demand from China. China is the largest importer of crude oil and the strict Covid lockdowns had been affecting global demand.
In addition, recent reports show that OPEC raised its output by only 57,000 barrels per day in March, as some of its African member countries have decreased their output and most of the production increase came from the Arab Gulf countries.
Last week, the International Energy Agency announced plans to release 120 million barrels from their emergency oil reserves, half of which will be released from U.S. stockpiles. The announcement has eased oil supply concerns, pushing oil prices down.
On the other hand, the crisis between Russia and Ukraine is intensifying concerns of disruptions in oil distribution, supporting oil prices. The US has already banned all oil and gas imports from Russia, with as many as 3 million barrels per day of Russian crude oil potentially removed from the market as a result of sanctions and of boycotting of Russian oil. A new round of sanctions on Russia was also agreed upon by EU member states last week, targeting the energy sector for the first time, with a ban on coal imports from Russia worth €4bn a year.
On Monday, the EU held a high-level dialogue with OPEC in Vienna, to discuss the possibility of oil sanctions on Russia. The EU is still hesitant to enforce an embargo on Russian oil, as many of its member states, especially Germany, depend heavily on Russian oil imports. It was also reported that OPEC has warned the EU that it would be impossible to replace the 7 billion barrels per day of Russian oil exports, suspending the EU’s plans for bans on Russian oil.
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