Oil spikes above 2-month high as EU bans Russian crude
WTI crude surpassed the resistance level of $115.7 per barrel (highs of March 24) and reached an intraday high of $118 per barrel before retreating to $116 per barrel as of this writing. Earlier today EU leaders agreed to ban about 90% of Russian seaborne oil by the end of 2022, renewing worries of a tighter global energy market.Germany and Poland decided to stop buying Russian crude through the Druzhba pipeline by the end of 2022, but Hungary, the Czech Republic, and Slovakia were granted an exemption owing to their reliance on Russian pipelined oil and to avoid a deal failure.
Today marks the
crude's ninth straight session of advances, with May set to close with a 15% increase, the greatest monthly performance since January 2022.The reopening of the cities of Beijing and Shanghai has boosted crude oil prices recently, as China is the world's second largest consumer, accounting for 15% of global demand.
On the production front, the OPEC+ meeting next Thursday might see oil-producing countries declare additional increases starting at around 450,000 barrels per day, which is still quite low in comparison to Western countries' requests to ramp up output quicker.
From a technical standpoint, the daily relative strength index (RSI), which gauges uptrend momentum, continues to rise, hitting the 65 mark, the highest since March 9, but is now approaching overbought territory.
Bottom line, the European supply shock, increased global mobility ahead of the summer, and positive technicals may push the global oil market into a new period of tightness, with further upside risks for prices, while crude's main negative factor – a recession with slowing demand – is still a long way off.
The psychological level of $120 is now the next major resistance, and beyond that, bulls might seek to attack $126.5 (March 8 highs). On the downside, $114 (highs of May 27) might act as a support.
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