Oil continued trading lower on Wednesday, with WTI price ranging between $88.5 and $90.7 per barrel on Tuesday. Last week, WTI price had climbed to $93.4 per barrel, its highest level since 2014, but this week the price of the commodity is retreating from last week’s highs. WTI is still trading in an uptrend, but in case the uptrend is reversed, support may be found at the $82.4 per barrel level and further down around $78.8 per barrel and $77.8 per barrel.
Expectations of increased supply have put pressure on oil prices on Wednesday, as the US is showing determination to boost supply and bring oil prices down. The US government is even considering lifting sanctions against Iran, which would boost oil supply considerably. In addition, the latest monthly report from the Energy Information Administration, raised its outlook for U.S. crude production to average 11.97 million bpd this year and predicted Oil production in the US could reach record highs within 2023.
The price of oil has been increasing over the past months, as existing international inventories are at their lowest levels in seven years and supply is trying to catch up with rising demand. US Crude Oil Inventories released on Wednesday, showed a decrease by nearly 5 million barrels. Last week, OPEC+ agreed to increase its output by 400,000 barrels per day, but some of its member countries struggle to meet their output goal, raising doubts on whether the organisation will be able to deliver the amount promised.
Geopolitical pressures, especially between Russia and Ukraine have been among the primary drivers of oil price increase. US President Joe Biden met with the new German chancellor, Olaf Scholz, to discuss possible sanctions against Russia, but failed to agree on the future of the Nord Stream 2 gas pipeline. The US President was adamant that the colossal project should not be allowed to go through in case of a Russian attack against Ukraine. The German councillor did not seem to agree though, as the project would provide Germany and the Eurozone as a whole with a supply of much-needed natural gas, especially in the midst of an energy crisis and soaring energy costs in the EU.
The EU is on the brink of an energy crisis and sanctions against Russian gas and oil companies will likely exacerbate the problem. The EU is attempting to build a partnership for energy security with the US and other Natural Gas suppliers, in order to mitigate a potential energy crisis and shield EU consumers and households from energy shortages.
On Thursday, US Natural Gas Inventories are scheduled to be released. As there are rising concerns over energy supply and existing inventories worldwide are tight, this indicator may affect the price of oil as well.
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