Oil prices stable as G7 talks hit a dead end

Oil prices were stable on Thursday, with WTI prices fluctuating around the $78.0 per barrel level, trading with low volatility. If the WTI price declines, it may encounter support near $76.5 per barrel, while resistance can be found at $90.3 per barrel and further up at $93.4 per barrel. 

Trading volumes were low on Thursday because of the US Thanksgiving holiday. Oil prices were also muted as traders awaited the G7 decision on the Russian oil cap. G7 nations reportedly considered a price cap on Russian oil in the range of $65 - $70, which is above the current market level. Such a price cap would not hinder the trading of Russian oil, making this sanction against Russia a little more than a gesture. The continuation of the Russian oil trade would potentially prevent a supply shortage, driving oil prices down. G7 leaders, however, have reportedly failed to reach a consensus on the price cap, and talks have hit a dead-end. EU energy ministers could not decide on this issue, because their views diverged largely.

This week reports that China has increased Covid measures, fuelled global recession concerns pushing oil prices down. Chinese authorities had to lock down Guangzhou’s largest center, while schools in Beijing closed. On Tuesday, Covid measures were also tightened in Shanghai. The country continues to grapple with rising Covid cases, with heavy restrictions impacting economic output. Beijing and other major Chinese cities have reported record coronavirus cases, dashing expectations of ending lockdowns. Health authorities in China seem committed to keeping strict lockdowns and quarantines in place for the time being. The uncertainty over oil demand in China has influenced oil prices considerably as China is the world’s largest energy importer and zero-Covid restrictions severely limit oil demand. 

October’s US inflation print came below expectations, bringing the dollar down last week. Cooling US inflation has reduced Fed rate hike odds, diminishing global recession concerns. Market expectations of future rate hikes were considerably trimmed after the CPI inflation report the week before and were further diminished after Tuesday’s PPI inflation print. Aggressive rate hikes stifle economic activity, undercutting oil demand and putting pressure on oil prices. 

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Written by:
Myrsini Giannouli

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