Oil prices climbed again on Monday, with WTI rising above $105 per barrel. If the WTI price drops, support can be found at the psychological level of $100 per barrel and further down at $90 per barrel level, while resistance can be found near $118.3 per barrel and further up at $130 per barrel.
Last week, concerns for a fall in demand and rising hopes of de-escalation of the crisis in Ukraine put pressure on the price of oil. On Monday though, reports of possible new sanctions against Russia have bolstered oil prices, as tensions between Russia and Ukraine intensify, and the situation does not seem likely to be resolved soon. Last week, diplomatic talks between Russia and Ukraine sparked hopes of a resolution to the crisis, curtailing the advance of oil. A de-escalation of the crisis still seems to be some way off, however, and attacks against Ukrainian cities continue unabated.
The US announced a plan last week to release an unprecedented amount from its crude reserves. US President Joe Biden stated that he’s authorizing the release of 1 million barrels of oil per day for the next six months from the U.S. Strategic Petroleum Reserve, totaling over 180 million barrels. The US is trying to tame soaring oil prices, as Russian bans create energy shortage.
The US has banned all oil and gas imports from Russia, with as many as 3 million barrels per day of Russian crude oil potentially removed from the market as a result of sanctions and of boycotting of Russian oil. The EU has not imposed direct bans on Russian oil and gas imports yet, since the Eurozone relies heavily on Russian energy-related imports. EU countries are considering such a ban as a last resort only, as it would plunge the Eurozone into an unprecedented energy crisis.
In its latest meeting last week, OPEC+ decided to increase its output by 432,000 barrels per day, starting from May 1. This is a modest increase in the organization’s output goal, compared to the 400,000 barrel per day increase promised in previous months. Increased supply concerns, combined with high demand, have led OPEC+ to increase its output goal, but only marginally. OPEC’s Monthly Oil Market Report for March predicted that global oil demand is going to continue to grow, despite recent developments.
Oil prices are also under pressure by reports that a large wave of covid cases in China is forcing the country to enter lockdown once again. China is the largest importer of crude oil and fears of a decrease in demand from lockdowns have sent oil prices plummeting. If the pandemic is re-ignited and countries start imposing new restrictions and re-entering lockdowns, it may signal another drop in the oil demand.
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