Oil prices continued to decline on Tuesday, with WTI dropping below the $100 per barrel key level. 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 $118.3 per barrel.
Oil prices are especially volatile, as competing factors affect oil supply and demand. 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.
The EU has drafted a new package of Russian sanctions, including a ban on Russian oil crude imports. Even though the ban, if enforced, 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 favor of gradually weaning off Russian oil imports. EU’s Russian oil sanctions have stalled though, as some EU member states, such as Hungary and Bulgaria, oppose the ban and are threatening to veto the plan.
Stalling global economic growth and lockdowns in China dampen demand. Covid restrictions in China have raised fears of a large decrease in global oil demands. China is the largest importer of crude oil and continuing Covid lockdowns have dampened oil demand, pushing prices down.
Last week, OPEC+ decided to raise its production output by a modest 432,000 barrels per day for next month. OPEC members responded to the plans of an EU ban on Russian oil by raising their production targets. OPEC’s announcement halted the rally of oil prices, alleviating global oil demand a little.
The first of the bi-annual OPEC meetings are scheduled to be held on Wednesday in Vienna. The members of the organization will discuss a range of subjects, focusing on oil prices, and will decide on their output goal. The event is expected to attract traders' attention and high volatility in the price of oil is expected following the conclusion of the meeting and the release of the formal OPEC statement.
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