Oil prices tumbled to nine-month lows on Monday as monetary tightening intensified global recession concerns. WTI price continued to decline, dropping to $76.6 per barrel. If the WTI price declines further 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.
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.
In addition, the dollar reached fresh 20-year highs on Monday, as the dollar index rose above the 114 level. Increased dollar value is putting pressure on oil prices, decreasing demand, as oil is priced in dollars.
Oil prices are also weakened by concerns of declining demand as China steps up Covid measures. China, which is the world’s largest oil importer, has introduced new Covid lockdowns in several parts of the country.
Oil prices are 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.
Supply woes are keeping oil prices up, as prospects of reviving the 2015 Iran nuclear deal have decreased considerably. OPEC+ members have agreed to cut down production by 100,000 barrels per day to offset the potential return of Iranian barrels to oil markets. The organization has seen oil pricing slipping over the past month and has decided to curtail oil production to keep oil prices high. Despite mounting global recession risks, OPEC+ members strive to defend the $100 per barrel key level.
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