Crude Oil Prices Rise as EU Considers Russian Ban, Saudi Facility Affected
CRUDE OIL PRICE OUTLOOK:
- WTICcoarse oil prices extended four-day 18% rally amid talk of EU ban on Russian energy imports
- Saudi refinery facilities were attacked by Iran-backed Houthi rebels over the weekend
- China’s tough measures against Covid-19 resurgence could cloud its energy demand outlook
crude oil price extended a four-day gain as traders mull a possible EU ban on Russian energy imports and attacks against Saudi Arabia petroleum facilities. WTI is trading at $112.7 a barrel and Brent is hovering above $118 a barrel in Tuesday’s APAC midday session. Meanwhile, China’s imposition of Covid shutdowns and travel bans in key cities has raised new concerns about energy demand from the world’s biggest oil importer.
European Union leaders and US President Joe Biden will meet later this week to discuss a new response to Russia’s invasion of Ukraine. Several EU countries have said the bloc should impose tougher sanctions, including joining the United States in ban imports of Russian oil. However, this is unlikely to happen in the short term, as Germany has said such imports are crucial for EU energy security.
Always, with the Ukrainian War worsens and the military conflict persists, the likelihood of further sanctions increases. Crude oil prices could have more room to maneuver if the EU were to impose sanctions on Russian energy products, depleting supply in an already tight market. The EU is the largest consumer of Russian oil and petroleum products, and therefore any action taken against trade can have a profound impact on oil prices.
In addition, oil prices have been inflated attacks by the Iranian-backed Houthi rebels targeting Saudi Arabia Energy Facilities during the weekend. According to the Saudi Energy Ministry, drone strikes hit a distribution terminal for refined petroleum products in the Jizan region, a refinery at the Red Sea port of Yanbu and a natural gas plant.
On the demand side, restrictions have been eased in the city of Shenzhen after a week of confinement due to an epidemic of Covid-19. The city has a population of 17.5 million and is the technology hub of the Greater Bay Area. Meanwhile, millions more people in the northeast of the country have been placed under lockdown orders. The world’s biggest oil importer has been hit by a viral upsurge in recent weeks. Policy makers have imposed strict blockages, travel bans and social distancing measures in many cities to contain the rapid spread of the Omicron variant. More than 40 million people have been affected.
These efforts will inevitably curb the country’s consumption of energy and raw materials. The question is how long it will take for the number of infections to drop to a comfortable level for authorities to ease these restrictions.“Beijing”zero-CovidThe strategy suggests the shutdowns can last a long time, casting a shadow over crude oil prices in the weeks ahead.
Daily new cases of Covid-19 in China
Technically, WTIrebounded from a key support level of 94.9 last week, resuming its upward trajectory. The overall trend remains bullish as prices have formed consecutive highs and lows. An immediate support level can be found around 105.80 – the 100% Fibonacci extension. An immediate resistance level can be found around 119.25. The MACD indicator is about to form a bullish cross, suggesting that buying pressure may be building.
WTI Crude Oil Price – Daily Graphic
— Written by Margaret Yang, Strategist for DailyFX.com
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