Oil plummets on profit-taking

Oil prices retreated on Monday, after surging last week. WTI price dipped to $88.8 per barrel on Monday from $95.3 per barrel last week, representing a 14-month high. If WTI price declines, it may encounter support near $88.5 per barrel, while resistance may be found near $95.3 per barrel.

Oil prices dipped on Monday as investors saw a chance to profit from the recent high oil prices. Traders took profits on Monday concerned about a correction in the overly high oil prices of the past few days. 

Oil prices are also kept in check by a strong US dollar and high-interest rates. The oil demand outlook has declined as the Fed has hinted at further tightening. The Fed decided to pause rate hikes at its September policy meeting, but that does not necessarily mean it has reached its rate ceiling. Even if the Fed has reached its interest rate ceiling, rates are likely to stay high for longer to bring inflation down. 

Deterioration in China’s economic outlook is also keeping oil prices down. Uncertainty over China’s economic recovery has put a cap on oil prices. China is the world’s largest importer and a weaker Chinese oil demand outlook has put pressure on oil prices. The World Bank on Monday forecast China’s growth for 2023 at 5.1%, up from 3% in 2022 but still representing a slowing growth pace since April.

Supply concerns have been boosting oil prices in the past couple of weeks. Russian authorities have decided to restrict diesel and gasoline exports to stabilize domestic fuel prices. Russia, however, decided to relax the fuel ban last week, assuaging supply concerns. Russia lifted restrictions on certain fuel types, specifically fuel used as bunkering for some vessels and diesel with high Sulphur content.

TRADE WTI

The content provided in this material and/or any other material that this content is referred to, whether it comes from a third party or not, is for information purposes only and shall not be considered as a recommendation and/or investment advice and/or investment research and/or suggestions for performing any actions with financial products or instruments, or to participate in any particular trading strategy and cannot guarantee any profits. Past performance does not constitute a reliable indicator of future results. TopFX does not represent that the material provided here is accurate, current, or complete and therefore shouldn't be relied upon as such. This material does not take into account the reader's financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of TopFX, no reproduction or redistribution of the information provided herein is permitted.

Written by:
Myrsini Giannouli

Share the article: