Oil prices fall as EU oil ban stalls

Oil prices went into free fall on Monday, with WTI dropping from $110 to $102 per barrel, led by a global stock sell-off. If the WTI price drops, support can be found at the $94.5 per barrel level and further down at the $90 per barrel level, while resistance can be found near $118.3 per barrel. 

Stock markets crashed on Monday, with global stocks suffering their worst day since 2020, driving investors to safe-haven assets. Oil prices and stocks fell amid the overall market sell-off on Monday

Oil prices are especially volatile, as competing factors affect oil supply and demand. The crisis between Russia and Ukraine has been intensifying concerns of disruptions in oil distribution, supporting oil prices. The US has already banned all oil and gas imports from Russia, with as many as 3 million barrels per day of Russian crude oil potentially removed from the market as a result of sanctions and of boycotting of Russian oil. 

The EU has drafted a new package of Russian sanctions, including a ban on Russian oil crude imports. Even though the ban, if enforced, will likely throw the Eurozone into an energy crisis, it will likely not take effect for some time. The EU is hesitant to cut off Russian oil imports abruptly, as most EU member states are in favor of gradually weaning off Russian oil imports. EU’s Russian oil sanctions have stalled though, as some EU member states, such as Hungary and Bulgaria, oppose the ban and are threatening to veto the plan.

Stalling global economic growth and lockdowns in China dampen demand. Covid restrictions in China have raised fears of a large decrease in global oil demands. China is the largest importer of crude oil and continuing Covid lockdowns have dampened oil demand, pushing prices down. 

Last week, OPEC+ decided to raise its production output by a modest 432,000 barrels per day for next month. OPEC members responded to the plans of an EU ban on Russian oil by raising their production targets. OPEC’s announcement halted the rally of oil prices, alleviating global oil demand a little.

The first of the bi-annual OPEC meetings are scheduled to be held on May 11th in Vienna. The members of the organization will discuss a range of subjects, focusing on oil prices, and will decide on their output goal. The event is expected to attract traders' attention and high volatility in the price of oil is expected following the conclusion of the meeting and the release of the formal OPEC statement.

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: