Oil prices were steady on Thursday, balanced out by competing market forces. WTI price exhibited low volatility, hovering around the $84 per barrel level. If the WTI price declines, it may encounter support near $82 per barrel, while resistance can be found near $90.5 per barrel and higher up at the $98 per barrel level.
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 civilian conscripts on Wednesday. Putin also renewed threats to halt all energy exports and threatened western allies with nuclear action. His speech renewed fears of a global energy crisis driving oil prices up. G7 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.
Aggressive rate hikes stifle economic activity fuelling recession fears and pushing oil prices down though. On Thursday, the BOE voted to raise its interest rate by 50 basis points, while the US Fed raised its interest rate by 75 basis points on Wednesday. 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.
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.
Supply woes are keeping oil prices up. OPEC+ reportedly missed its production target by 3.583 million barrels per day in August. In addition, prospects of reviving the 2015 Iran nuclear deal have decreased considerably. New hurdles in the negotiations have raised doubts on whether Iran is committed to the deal. If the deal goes through, it can add more than a million barrels of oil per day to the global market providing some relief to oil demand.
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. OPEC+ members strive to defend the $100 per barrel key level, despite mounting global recession risks.
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