Oil prices rallied on Wednesday, after falling to nine-month lows earlier in the week. WTI price rose above $82 per barrel. If the WTI price declines, it may encounter support near $66.5 per barrel, while resistance can be found near $86.9 per barrel and higher up at the $90.5 per barrel level.
Supply concerns support oil prices. US crude oil inventories released on Wednesday were considerably lower than expected, dropping by 0.2M barrels, while an increase of 2.0M barrels was anticipated. In addition, a Hurricane in the Gulf of Mexico is disrupting oil distribution of about 190,000 barrels per day, propping up oil prices. The dollar’s sharp decline on Wednesday also boosted oil prices, increasing demand, as oil is priced in dollars.
Oil prices are also supported by fears of further escalation in the Ukraine crisis. Russian President Vladimir Putin announced the partial mobilization of Russian military reserves from civilians last week. Putin also renewed threats to halt all energy exports and threatened western allies with nuclear action. finance ministers have agreed to impose a cap on Russian oil prices and Russian President Vladimir Putin has threatened to retaliate by halting oil and gas exports if price caps were imposed.
Fears that rising interest rates may tip major economies into recession, limiting oil demand, are pushing oil prices down. Aggressive rate hikes stifle economic activity fuelling recession fears and pushing oil prices down. Last week the BOE voted to raise its interest rate by 50 basis points, while the US Fed raised its interest rate by 75 basis points. Federal Reserve Chair Jerome Powel has raised expectations for future rate hikes, stating that the Fed is determined to curb inflation even at the expense of economic growth.
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