- WTI continues to trade near $100 as market participants weigh energy security developments in Europe against China demand/global growth fears.
- The latest US inventory figures gave WTI a short-lived lead with the US SPR falling to its lowest level since 2002.
After posting a solid recovery on Tuesday after Monday’s brief drop to $95.00 a barrel, WTI futures of the month The previous one hovered around $100 a barrel again on Wednesday. Oil prices continue to be hit by the conflicting forces of rising geopolitical and economic tensions between Russia and NATO and concerns about weak global growth and demand in China.
The latest official weekly US inventory figures gave WTI a brief lead after a smaller-than-expected build in core inventories and a larger-than-expected decline in gasoline and distillate inventories caused the Fed US Strategic Petroleum Index fell to its lowest levels since 2002. The shock of the data probably won’t have a massive impact in the grand scheme of things.
Regarding tensions between Russia and NATO, Russia’s Gazprom announced on Tuesday that it would halt gas flows to Poland and Bulgaria after the countries refused to pay in rubles, which market commentators said at the time. marked a major escalation in the confrontation between the EU and Russia. on the supplied gas. However, sources told news wires on Wednesday that major gas importers in several other European nations have given in to Russian demands for ruble payments, despite EU Commission President Ursula von der Leyen, talked a lot about how the EU would not be blackmailed by Russia for energy.
The EU subsequently reiterated plans to tighten sanctions on Russia, including on oil imports, and developments are interpreted by market participants to have increased the risk of energy shortages in the EU, which is supporting WTI. But this was not enough for WTI to return north of its 21 and 50 day moving averages at the $101.58 and $102.81 levels. Although geopolitics have been supportive, oil prices have been affected by concerns over demand in China and the drop in global equities as a result of global growth and central bank tightening fears, as well as continued strengthening of the US dollar.
When the US dollar appreciates, USD-denominated crude oil becomes more expensive for international currency holders, reducing demand. Looking at WTI over a longer time horizon, the US benchmark of light sweet crude oil continues to consolidate within a pennant formation that has been forming since early March.
The recent consolidation should not come as much of a surprise, as markets are possibly in wait-and-see mode if the Chinese lockdowns worsen substantially (which could push WTI back below the $90 level), or if there is an EU. energy embargo/blockade on Russian imports (which could push WTI back to $110). These will be the key issues to monitor going forward.
Technical levels
Source: Fx Street
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