Oil prices rallied on Tuesday, with WTI price touching $74 per barrel. If the WTI price declines, it may encounter support near $67.4 per barrel, while resistance may be found near $77 per barrel.
Reports that the US plans to replenish its strategic oil reserves boosted oil prices on Tuesday. The Biden administration reportedly plans to begin purchasing oil to replenish the nation’s emergency reserve after completing maintenance work later this year.
The Federal Reserve raised interest rates by 25 basis points at its monetary policy meeting on Wednesday, bringing the benchmark interest rate to a 16-year high target range of 5.00% to 5.25%. The US Central Bank has signaled that its hawkish policy is coming to an end, providing support for oil prices. The ECB also started slowing down the pace of rate hikes. As major central banks are winding down their hiking cycles, the oil demand outlook rises.
Oil prices have been under pressure, as mounting economic risks reduce the oil demand outlook. Recession concerns run high and aggressive rate hikes stifle economic activity, putting a lid on oil prices. US Treasury Secretary Janet Yellen in a letter to the US Congress warned that the office would not meet all US government obligations by June 1. Fears of a US debt default drove oil prices down.
The potential of a banking sector meltdown has reduced the oil demand outlook, as recession concerns mount. Fears of a banking sector meltdown are returning, diminishing the oil demand outlook.
Oil prices are supported by limited supply however, as OPEC+ producers recently decided to reduce output by 1.1 million barrels per day, to offset the drop in oil prices from the global banking crisis.
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