- Oil looks set to end the week higher, with WTI poised to end the week near $110.
- Anticipation of an imminent deal on an EU embargo on Russian oil is cited as support.
- Growth concerns, China lockdown risks and torrid conditions in equity markets are preventing WTI from breaking above $110 for now.
World oil prices continued to rise on Friday and appear to be on track to post a second consecutive weekly gain. WTI futures from the previous month failed to break above Thursday’s highs of $111.00 a barrel, but nonetheless was last seen rising $1.50 near $110, with weekly gains currently above $5.50. Market commentators continued to cite expectations that EU nations will soon come to an agreement on a phased Russian oil import ban as support for price action.
The sources told Reuters on Friday that the EU is looking for ways to appease some of the smaller EU nations that have so far refused to sign on to the ban. Another factor cited as supporting the price action is OPEC+’s continued slowness to bring supply back into the market. The cartel agreed earlier this week to stick to its current policy of increasing production quotas by 432,000 barrels per day each month, although there is little confidence that the group can actually meet this output increase target as the Russian production falls amid Western sanctions. and smaller OPEC+ nations are struggling amid chronic underinvestment.
“The impending EU embargo on Russian oil has the hallmarks of a sharp supply squeeze,” an oil market analyst at the PVM broker said on Friday. “Regardless, OPEC+ is in no mood to help, even as rising energy prices cause damaging levels of inflation,” they added.
WTI bulls continue to eye a test of the late March highs at $116.00, though for now, concerns about slowing global growth and demand in China amid ongoing lockdowns in major cities are holding back the price. rise. In its latest forecasts, the Bank of England on Thursday forecast a decent chance of a recession in the UK in 2023 and there are fears that the eurozone economy may be heading the same way.
Meanwhile, torrid conditions in US (and global) stock markets as investors worry about aggressive Fed tightening, slowing growth, geopolitical risks and risks of lockdowns China is also likely to curb the rise in crude oil. Although it has weakened of late, WTI has historically been positively correlated with US equities given its status as a risk-sensitive commodity.
Technical levels
Source: Fx Street
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