Oil prices edged higher this week, boosted by further sanctions on Russian oil from the G7 meeting, with WTI prices climbing above $113 per barrel on Tuesday. If the WTI price retreats, support can be found further down near $98 per barrel, while resistance can be found near the $121.2 per barrel level and higher up at $130 per barrel.
G7 leaders have decided on Tuesday to take further action against Russia, by imposing “severe and immediate economic costs” on Russia. Further sanctions on Russian oil exports are expected, possibly by enforcing a price cap on Russian oil exports, although details have yet to be decided.
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 though, 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.
Geopolitical tensions also support oil prices, as tight supply raises fears of an energy crisis, especially in the EU. 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.
Many OPEC members continue to underperform, raising doubts about whether the organization can maintain its output goal, and adding to supply concerns. This week, two OPEC meetings have been scheduled and are likely to draw the attention of market participants.
OPEC members will meet on Wednesday and a meeting of OPEC+ will take place on Thursday. In its meeting this week, OPEC+ will likely discuss its output goals for August and the next few months. OPEC+ is expected to keep production goals for August to the same levels set in its previous meeting, in which the organization’s members had agreed to raise their output goal by approximately 648,000 barrels a day. It remains to be seen, however, whether the bans on Russian oil have allowed the organization to reach its output quotas.
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