Oil prices hit five-month lows

Oil prices continued to decline on Tuesday, with WTI price dropping to its lowest level since July, touching the $72.0 per barrel level. If WTI price declines, it may encounter support near $70.0 per barrel, while resistance may be found near $79.6 per barrel.

Oil prices have been retreating, even though OPEC+ announced fresh production cuts last week in an attempt to maintain oil prices above the $80 a barrel mark. OPEC+ producers agreed to over 2 million barrels per day of voluntary cuts, extending already existing output cuts into the first quarter of 2024 and adding even more. As output cuts will be voluntary, however, it was left to each country individually to announce its production cuts. There are clear signs of dissent between OPEC+ members. Markets were left unconvinced that the organization would maintain the output cuts and oil prices are declining.

Global economic concerns are dampening the oil demand outlook, putting pressure on oil prices. A strong US dollar and high-interest rates also keep oil prices in check. Most major central banks, however, are hitting pause on rate hikes, boosting oil prices. FOMC members have voted to keep interest rates unchanged at a target range of 5.25% to 5.50%. 

The Fed’s approach remains largely data-driven and will depend on how fast inflationary pressures may ease in the next months. Even if the Fed has reached its interest rate ceiling though, rates are likely to stay high for longer, driving oil demand outlook and oil prices down. 

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Written by:
Myrsini Giannouli

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