After the European Union leaders agreed on Tuesday to ban almost 90% of Russia’s oil imports by the end of 2022, raising concerns about a tighter market due to higher demand expectations in the summer, the oil prices extended their rallying.
In the highest rebound since it hit nearly $140 in early March, the benchmark for two-thirds of the world’s oil, Brent, climbed 1.78% to $123.80 while the gauge that tracks US crude, West Texas Intermediate, jumped 3,6% to $119.20 a barrel.
Due to the supply concerns, the war in Ukraine and the increased demand as global economies recover from the Covid pandemic, both Brent and WTI benchmarks have gained more than 70% since last year.
According to Craig Erlam, a senior market analyst at Oanda, with the latest EU developments and lockdowns easing in China, Brent could easily return to its March highs which doesn’t bode well for the global economy or the inflation.
Erlam warned that anyone hoping that Opec+, which is set to meet on Thursday, could step are setting themselves up for disappointment since the Opec+ alliance, led by Saudi Arabia and Russia, is expected to stick to its plans to raise production by only 432,000 bpd.
Jeffrey Halley, a senior market analyst at Oanda, emphasized that the supply/demand dynamic could be changed only by a capitulation to Venezuela’s autocratic government or a surprise deal with Iran, which is unlikely considering Tehran’s is seizing tankers at the moment.
However, neither would alleviate the refined products; squeeze underpinning the rally, and the fact that the world’s second-largest economy and the biggest importer of energy, China, has begun to ease Covid restrictions and reopening, isn’t easing the situation.
With traders paying closer attention to the oil and supply equation in the eurozone, the next resistance for the Brent oil price is $125, while the support is at $109 in terms of the technical price level, Naeem Aslam, the chief market analyst at Avatrade, believes.
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