Oil prices rallied last week and continued to rise on Monday and early on Tuesday, with WTI climbing above $121 per barrel for the first time in over two months. Oil prices plummeted later on Tuesday though, with WTI falling as low as $116 per barrel. If the WTI price drops again, support can be found at $110 per barrel and further down at $94.5 per barrel, while resistance can be found near $118 per barrel and $121 per barrel.
Last week, the EU announced plans for ending its dependency on Russian oil imports within 5 years, boosting oil prices. On Tuesday, EU members agreed on a new package of sanctions against Russia, including a ban on Russian oil imports. Several EU members, such as Hungary, have been opposing the plan, as they depend heavily on Russian oil imports. The European Council agreed on a compromise on Tuesday, allowing temporary Russian oil flows to Hungary, Slovakia, and the Czech Republic. This plan will effectively reduce EU oil imports from Russia by 90% by the end of the year. Oil prices spiked after the announcement of the ban, amid supply worries.
In addition, the Biden administration hinted last week that they do not rule out restricting US oil exports to combat tight supply, driving oil prices up. US officials have 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.
The oil demand outlook has increased, as the extended Covid lockdown in Shanghai is about to end. 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, oil prices are climbing back up. Lockdown restrictions in Shanghai will end on June 1st and the large commercial hub will resume its operations.
Global recession fears are rising,g however, check the ing oil price rally. The economy in China has taken a big hit from the prolonged Covid lockdowns. Last week, IMF director Kristalina Georgieva warned that recession is possible, even for major economies.
This week, OPEC-JMMC Meetings are scheduled for June 2nd. OPEC+ise going to meet to set production quotas for July. High volatility in oil prices leading up to the meeting is expected, as well as after the announcement of the meeting outcome. It is reported that OPEC+ production fell short of its output goals last month, limiting supply and pushing prices up.
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