Oil hits new highs ahead of FOMC statement

WTI price continued rising early on Wednesday, ahead of the Federal Reserve announcement. As the threat of a Russian incursion into Ukraine continues, WTI climbed above last week’s price, reaching 88.4$ per barrel, and registering a new 7-year high. After the Federal Reserve announcements signaling a rate hike in March, WTI price dropped, but rallied again later.

The price of oil has taken off, as rising geopolitical tensions between Russia and Ukraine and also in the middle east, are creating an energy crisis. The US has placed over 8,500 troops on alert, fearing a possible escalation of the crisis between Russia and Ukraine. 

In addition, OPEC has failed to deliver the promised output, as some member countries, such as Nigeria and Iraq, cannot meet their goal output. OPEC has vowed to gradually restore output to pre-pandemic levels, increasing its output by 400,000 barrels per day. Oil production capacity remains an issue however and, as existing inventories are tight, a potential oil shortage may push the price of the commodity to three-digit figures within the year. Even though US oil inventory data released on Wednesday were higher than expected, this did not affect the price of the commodity, which continued to rise.

The outlook for the commodity is bullish and it is currently trading above the $85.7 per barrel resistance level. In case the trend is reversed, support may be found at the $77.8 per barrel level. Today, investors’ focus will be on the aftermath of the Federal Reserve announcements, as traders will analyse Fed chair Powell’s speech. Traders should also keep an eye on geopolitical developments, especially on the Russia-Ukraine crisis.

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Written by:
Myrsini Giannouli

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