- Oil prices have stabilized on Tuesday after a sharp deterioration in global risk appetite on Monday triggered a sharp sell-off.
- After falling $8 on Monday, WTI has stabilized below $103.
- Analysts suspect the scope for further decline is limited as the EU moves closer to a deal on the Russian oil embargo.
oil prices have stabilized on Tuesday after a sharp deterioration in global risk appetite on Monday triggered a sharp sell-off. After falling almost $8 on Monday from above $110 a barrel, WTI futures from the previous month found support on Tuesday above the important psychological $100 level and is currently trading largely unchanged on the day at $102.50.
Monday’s risk-off conditions that weighed on oil were the result of investor concern over a combination of bearish factors, including; 1) concerns about central bank tightening amid still-soaring inflation in the US, Europe and elsewhere, 2) concerns about slowing global growth and continued inflationary risks emanating from the Russo-Ukrainian war and closures in China.
But “it looks like oil markets have more room to fall in the short term,” a senior market analyst at OANDA said on Tuesday, a sentiment echoed by many other analysts. They cite the continuing risks to Russia’s oil production posed by Western sanctions in response to the invasion of Ukraine.
EU 27 nations have yet to agree on a plan to end Russian oil purchases, with Hungary particularly reluctant to sign up to the embargo and some saying this could also have hit crude prices this week. But several high-level EU officials/leaders, including European Commission President Ursula von der Leyen and French President Emmanuel Macron, have been in contact with Hungarian President Viktor Orban in recent days. to try and incorporate it.
French European Affairs Minister Clement Beaune said on Tuesday that EU nations could reach an agreement on the next round of Russian oil sanctions this week. Meanwhile, Japan has also said it will phase out purchases of Russian oil.
Looking ahead, US crude inventory data will come into focus later in the day with the release of the weekly private API report at 21:30 BST, likely to show a drop in crude stocks according to a Reuters analyst poll released. Monday. This could lend more support to WTI.
Technical levels
Source: Fx Street
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