WTI price dropped below the $109 per barrel level on Wednesday, as there seems to be no headway in negotiations between EU member states for implementing a ban on Russian oil imports. On Thursday however, reports of possible new US bans on Russian oil brought oil prices back up, with WTI reaching $112 per barrel. 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 further resistance can be found near $118.3 per barrel.
Stalling global economic growth and lockdowns in China have reduced oil demand. 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, fears of prolonged lockdown ease, drive oil prices back up.
This week, news of reduced Covid cases in Shanghai, fuelled optimism that the large financial centre would soon reopen. Health authorities in China have signalled that lockdown restrictions in Shanghai will start easing from May 21st and will end on June 1st. Even though many other cities in China are under strict lockdown, news of the end of the lockdown in Shanghai brought oil prices up. The end of pandemic restrictions in China would increase oil demand once more, driving oil prices further up.
The crisis between Russia and Ukraine has been 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. US officials have recently stated, however, that the Biden administration is preparing new sanctions on Russian oil imports that aim to cripple the Russian economy. Reports of additional sanctions on Russian oil have boosted oil prices on Thursday.
The EU has also drafted a new package of Russian sanctions, including a ban on Russian oil crude imports. Even though the ban, if implemented, will likely throw the Eurozone into an energy crisis, it will likely not take effect for some time. The EU is hesitant to cut off Russian oil imports abruptly, as most EU member states are in favour of gradually weaning off Russian oil imports. If approved, the EU ban will likely result in phasing out Russian oil imports over the next six months to a year. EU’s Russian oil sanctions have stalled though, as some EU member states, such as Hungary, oppose the ban and are vetoing the plan.
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