WTI price almost touched the $100 per barrel key level on Wednesday, as oil prices withdrew. If the WTI price drops, support can be found at the $94.5 per barrel level and further down at the $90 per barrel level, while resistance can be found near $118.3 per barrel.
Oil prices have dropped due to expected reductions in demand, as the IMF cut its global growth forecast. The IMF meetings this week have pointed to a marked reduction in global growth, signaling a fall in the oil demand. US crude oil inventories fell sharply on Wednesday by 8 million barrels though, indicating that production levels are still low, and providing support for oil prices.
Increasing geopolitical tensions and easing lockdown rules in China have also spurred oil demand. Large releases from strategic stockpiles have failed to curtail rising oil prices, raising fears of an impending energy crisis.
Reports of easing lockdown restrictions in Shanghai have raised expectations of recovering demand from China. China is the largest importer of crude oil and the strict Covid lockdowns had been reducing global oil demand. As the large economic hub in China re-opens though, oil demand has been pushed back up.
In addition, the crisis between Russia and Ukraine has been intensifying concerns of disruptions in oil distribution, supporting oil prices. The US has already 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. A new round of sanctions on Russia was also agreed upon by EU member states last week, targeting the energy sector for the first time, with a ban on coal imports from Russia worth €4bn a year.
The EU is still hesitant to enforce an embargo on Russian oil, as many of its member states, especially Germany, depend heavily on Russian oil imports. The EU has held a high-level dialogue with OPEC in Vienna, to discuss the possibility of oil sanctions on Russia. OPEC has warned the EU though that it would be impossible to replace the 7 billion barrels per day of Russian oil exports, suspending the EU’s plans for bans on Russian oil. Most EU member states are in favor of gradually weaning off Russian oil imports.
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