Oil prices remained steady on Thursday, after falling to nine-month lows earlier in the week. WTI price fluctuated around $82 per barrel, testing the support at this level. 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.
In addition, prospects of reviving the 2015 Iran nuclear deal have decreased considerably. In its last meeting, OPEC+ cut down production by 100,000 barrels per day to offset the potential return of Iranian barrels to oil markets.
There is much speculation ahead of OPEC’s meeting next week. The organization is expected to further curtail oil production to keep oil prices high. There are even reports that Russia is may propose that OPEC+ reduce oil output by 1 million BPD. Such a move would see oil prices skyrocketing again ahead of the winter’s increase in demand. Despite mounting global recession risks, OPEC+ members strive to defend the $100 per barrel key level.
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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