Crude Oil, Hungary, Russian Oil Ban, China, Saudi Arabia, Technical Forecast – Talking Points
- Oil prices continue to fall as economic woes pressure narrative
- Saudi Arabia’s state-owned Aramco slashes its June prices
- WTI crude prices break below key support above the key 100 level
WTI crude oil prices look set to drop further in Asia-Pacific trading following a big overnight plunge. A report from Bloomberg suggesting that the European Union is softening its stance on a proposed ban on Russian oil appeared to drive most of the selling. Objections from Hungary were the main factor holding the bloc back from banning Russian oil outright.
Viktor Orban, Hungary’s Prime Minister, has cited security concerns over the ban, which has been in the works for weeks after Germany capitulated its stance last month. Hungary remains highly reliant on Russian energy products. The EU offered Hungary and Slovakia an exemption previously, but Mr. Orban has stated that his country would need a five-year exemption along with funds to transform Hungary’s infrastructure. The oil market will likely await further news on the next sanction package after the setback.
Meanwhile, broader economic concerns between surging inflation and China’s economic slowdown amid its Covid lockdowns are underpinning worries over the state of the global economy. Central banks are making aggressive shifts to combat prices, aiming to fight high expectations from becoming anchored in the economy, which would only work to further inflame high inflation. Shanghai officials expanded curbs across the city this week even as case numbers drop.
Saudi Arabia’s state-run Saudi Aramco announced it would reduce oil prices for June. The move will bring the premium paid by Asian buyers from over $9 per barrel to $4.40 per barrel. The premium paid for most buyers across Europe would also be reduced next month. The move signals that the major OPEC producer sees demand trailing off, likely induced by the bout of lockdowns across China due to Covid outbreaks. A larger pullback is unlikely given the uncertainty around China’s Covid situation as well as the ongoing conflict in Ukraine.
WTI Crude Oil Technical Forecast
Prices pushed below a major trendline and the 50-day Simple Moving Average (SMA), representing a break below confluent support that has helped underpin oil since December 2021. The 100 psychological level is now eyed as the most immediate area for potential support. A drop below that would bring the 100-day SMA into focus, currently at the 95 mark.
WTI Crude Oil Daily Chart
Chart created with TradingView
— Written by Thomas Westwater, Analyst for DailyFX.com
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