Oil prices were volatile last week, with WTI prices dropping below the $106.4 per barrel support level, before climbing back above $112 per barrel. Oil prices slipped on Tuesday, with WTI prices falling almost to the 110 level. If the WTI price drops again, support can be found at the $94.5 per barrel level and further down at the $90 per barrel level, while further resistance can be found near $118.3 per barrel.
Stalling global economic growth and lockdowns in China have reduced oil demand. China is the largest importer of crude oil and Covid lockdowns have dampened oil demand, pushing prices down. As Covid cases are starting to fall in China, however, fears of prolonged lockdown ease, drive oil prices back up. Health authorities in China have signaled that lockdown restrictions in Shanghai will end on June 1st. Covid lockdowns in Beijing are becoming stricter though, pushing down oil demand. Recession fears are also on the rise, as IMF director Kristalina Georgieva warned on Monday that recession is possible, even for major economies.
US banns on oil and gas imports from Russia support oil price, with as many as 3 million barrels per day of Russian crude oil removed from the market. In addition, US officials have recently stated that the Biden administration is preparing new sanctions on Russian oil imports that aim to cripple the Russian economy. If implemented, such bans have the potential to drive oil prices further up.
Last week, the EU announced plans for ending its dependency on Russian oil imports within 5 years, boosting oil prices. EU members though have made little headway in deciding on a more immediate ban on Russian oil imports. The EU is hesitant to cut off Russian oil imports abruptly, as most EU members 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, oppose the ban and are vetoing the plan.
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