Oil prices slipped on Wednesday, with WTI falling below the $100 per barrel support, reaching as low as $96.5 per barrel. If the WTI price drops, further support can be found at the $90 per barrel level, while resistance can be found near $118.3 per barrel and further up at $130 per barrel.
On Wednesday, the Energy Information Administration (EIA) announced an increase in crude oil inventories by 2.4 million barrels this week, indicating increased US output. The unexpected increase in supply has pushed oil prices down.
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. The zero-Covid plan in Shanghai has quarantined 26 million residents to their homes, raising fears of a generalized lockdown in China. China is the largest importer of crude oil and fears of a decrease in demand from lockdowns have sent oil prices plummeting.
Last week, concerns for a fall in demand and rising hopes of a resolution to the crisis in Ukraine curtailed the advance of oil. A de-escalation of the crisis still seems to be some way off, however, and tensions between Russia and Ukraine have intensified this week.
On Wednesday, the Biden administration announced new sanctions on Russia, targeting Russia’s largest financial institutions to increase economic pressure on Russia. 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. The EU is planning on targeting the Russian energy sector, proposing a ban on coal imports from Russia, worth €4bn a year. EU diplomats failed to agree on a ban on Russian coal on Wednesday though, proposed by the European Commission, citing technical difficulties mainly by Germany, which is a major coal importer from Russia.
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.
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.
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