Oil prices slipped on Monday, with WTI price plummeting from $90.0 per barrel to $85.5 per barrel, testing the $85.7 per barrel level support. If the WTI price declines, it may encounter further support near $82.2 per barrel, while resistance can be found at $90.3 per barrel and further up at $97.8 per barrel.
Oil prices benefitted from the dollar’s collapse towards the end of last week, halting the downward spiral of the past few days. October’s US inflation print came below expectations, bringing the dollar down. Cooling US inflation has reduced Fed rate hike odds, diminishing global recession concerns. Aggressive rate hikes stifle economic activity, undercutting oil demand and putting pressure on oil prices.
Surging Covid cases in China dragged oil prices down on Monday. The country continues to grapple with rising Covid cases, with heavy restrictions impacting economic output. Beijing and other major Chinese cities reported record coronavirus cases on Monday, dashing expectations of ending lockdowns. On Friday, some restrictions were lifted and oil prices spiked upwards on a positive oil demand outlook. Health authorities in China, however, seem committed to keeping the strict lockdowns and quarantines in place for the time being. The uncertainty over oil demand in China has influenced oil prices considerably as China is the world’s largest energy importer and zero-Covid restrictions severely limit oil demand.
Concerns of political uncertainty in the US caused market turmoil last week, putting pressure on oil prices. Concerns that political instability may tip the country into recession, reducing oil demand, have sent oil prices plummeting. This week, markets will await the US election outcome. Over the weekend, the Democratic party announced their victory in the key State of Nevada, which would have secured control of the House for the ruling party. It seems, however, that the Democrats were too quick to rejoice, as votes are still being tallied and the battle for securing the Senate seems to be close.
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