Oil rises as OPEC fails to deliver promised output

On Monday, WTI price fell amid a global stock sell-off, plummeting to $82.4 per barrel, before climbing again to above $84.6 per barrel. WTI continued trading below the $85.7 per barrel resistance on Tuesday morning, but broke through the resistance later in the day. WTI price continued trading along its uptrend, although with more modest performance than last week’s 7-year high.

The tensions between Russia and Ukraine, as well as in the middle east, are creating a crisis in the energy sector. Diplomatic talks seek to avert a military confrontation between Russia and Ukraine, but with little results so far. The US has placed over 8,500 troops on alert, fearing a possible escalation of the crisis. 

Meanwhile, 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. 

The outlook for the commodity is bullish and it is currently testing 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, traders should keep an eye on geopolitical developments and also on the upcoming announcements of the US Federal Reserve. US Crude Oil Inventories are also scheduled to be released today and may cause some volatility in the price of oil.

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Written by:
Myrsini Giannouli

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