Oil prices slipped on Wednesday, remaining above $100 per barrel though, with WTI retreating to the $102.5 per barrel level. If WTI declines again, it may encounter support near $98 per barrel and further down at $90 per barrel, while resistance can be found near the $105 per barrel level and higher up at $112 per barrel.
Heightened global recession fears have recently reduced the oil demand outlook though, putting pressure on oil prices. Concerns that interest rate hikes could slow global economic growth reducing energy demand have pushed oil prices down. Stalling economic growth combined with fiscal tightening and soaring inflation gives rise to fears of recession, halting the ascend of oil prices.
The Fed is expected to raise its interest rates again considerably this month to tackle skyrocketing US inflation, and a 75 bps Fed rate hike is priced in by markets. An increasing number of major Central Banks are moving towards a tighter fiscal policy. The ECB expected to raise its interest rate by at least 25 bps on Thursday, which may push gold prices further down. The BOE is also moving in a more hawkish direction, reportedly considering a rate hike of up to 50 bps.
US Crude Oil Inventories released on Wednesday were unexpectedly low, decreasing by 0.4 million barrels from last week. Oil supplies remain tight, supporting oil prices. In its latest meeting, OPEC+ maintained its output policy, raising its output by approximately 648,000 barrels a day. Many OPEC members continue to underperform though, raising doubts on whether the organization can maintain its output goal.
The US administration has been trying to secure a deal with Saudi Arabia to increase oil output and bring down oil prices. US President Joe Biden visited the country in an attempt to achieve assurances of higher oil output, but on Monday, reports that his attempts were fruitless, drove oil prices down.
Energy pressures in Europe are also providing support to oil prices. Nord Stream 1, Germany’s biggest gas pipeline, has been shut off for maintenance until the 21st of July, raising fears that Russia might use this pretext to cut off completely gas supplies from this pipeline. Moreover, Gazprom announced on Monday that it could not guarantee gas supplies to certain countries, due to ‘extraordinary’ circumstances, further exasperating the EU’s energy crisis.
Uncertainty over China’s oil demand is causing fluctuations in oil prices. China is the largest importer of crude oil and Covid lockdowns have dampened oil demand, pushing prices down. Reports of massive Covid testing in China and renewed restrictions have reignited fears of extensive lockdowns, pushing oil prices down.
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