Oil prices rose around 4% on Monday morning and continued to climb later in the day, after falling to nine-month lows last week. WTI price climbed above $84 per barrel ahead of the much-anticipated OPEC meeting on Wednesday. If the WTI price declines, it may encounter support near $82.1 per barrel, while resistance can be found near $86.9 per barrel and higher up at the $90.5 per barrel level.
OPEC+ will be meeting on Wednesday, to discuss production levels amid an energy upheaval and there is much speculation ahead of OPEC’s meeting. In its last meeting, OPEC+ cut down production by 100,000 barrels per day. The organization is expected to further curtail oil production to keep oil prices high and there are reports of a substantial output cut of at least 500.000 BPD. There are reports that Russia may propose that OPEC+ reduce oil output by 1 million BPD. An output cut of 1 million BPD or more would see oil prices skyrocketing again ahead of the winter’s increase in demand. OPEC+ members strive to defend the $100 per barrel key level, despite mounting global recession risks.
OPEC is determined to keep oil prices high, which have declined by as much as 25% since June. Slowing global economy and recession fears are undercutting oil demand pushing oil prices down. High oil prices may push fragile economies into recession even faster though, creating a vicious cycle. In addition, oil prices are driven down by the shift of most major Central Banks toward a tighter monetary policy. Aggressive rate hikes stifle economic activity, fuelling recession fears and pushing oil prices down.
Oil prices are also supported by fears of further escalation in the Ukraine crisis. Russian President Vladimir Putin recently renewed threats to halt all energy exports, after western allies agreed to impose a cap on Russian oil prices. In addition, the energy crisis in Europe intensifies, as there were leaks in three major Russian gas pipelines, raising suspicions of sabotage.
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