Crude Oil prices witnessed one and half percent higher on Wednesday after the European Union agreed to an additional round of sanctions threatening Russian oil flows that could tighten global crude supplies.
European Union ambassadors agreed on Wednesday to a 15th package of sanctions on Russia over its war against Ukraine, the Hungarian EU presidency said. “I welcome the adoption of our 15th package of sanctions, targeting in particular Russia’s shadow fleet”, European Commission President Ursula von der Leyen said on X.
The “shadow fleet” has aided Russia in bypassing the $60 per barrel price cap imposed by the G7 on Russian seaborne crude oil in 2022, and has helped keep Russian oil flowing. Curbing price gains on Wednesday, gasoline and distillate inventories rose by more than expected last week, according to data from the Energy Information Administration, weighing on crude prices.
Meanwhile, producers’ group OPEC cut its forecasts for demand growth in 2024 and 2025 for the fifth straight month on Wednesday and by the largest amount yet. OPEC+, which groups members of the Organization of the Petroleum Exporting Countries with other producers such as Russia, earlier this month delayed plans to start raising output.
Weak demand, particularly in top importer China, and non-OPEC+ supply growth were two factors behind the move. However, investors anticipate a rise in Chinese demand following Beijing’s latest plans to boost economic growth.
China said on Monday it would adopt an “appropriately loose” monetary policy in 2025 marking the first easing of its stance in 14 years. Chinese crude imports also grew annually for the first time in seven months in November, up more than 14% from a year earlier.
Meanwhile, the Kremlin said that reports of a possible tightening of U.S. sanctions on Russian oil suggested the administration of U.S. President Joe Biden wants to leave a difficult legacy for U.S.-Russia relations.
Treasury Secretary Janet Yellen said on Wednesday that the U.S. is continuing to look for creative ways to reduce Russia’s oil revenue and lower global demand for oil create an opportunity for more sanctions.
The European Central Bank is expected to deliver another 25bp rate cut at its December meeting. That has been the constant message from policymakers leading into the decision, despite another soft set of PMI figures, which had prompted markets at one point to price in a near 50% chance of a 50bp cut. With officials remaining resolute that a gradual pace is needed, 50bp cut bets have since been unwound.
Headline and core inflation have continued to undershoot the bank’s economic projections, but have not been weak enough to suggest a larger cut is needed.
Technical Outlook of Crude oil prices face pressure
Crude oil prices increased by 1. 52% to settle at 5934 yesterday. Prices received support from 5838 and reached an intraday high of 5947.
Since last Friday, prices have moved positively from the low of 5690 and have risen nearly 3.50%. The recent price movement led to the formation of a three white shoulder candlestick, which is a bullish pattern.
Additionally, prices are trading on the brink of a bullish pennant pattern. Both of these patterns suggest that a significant move is imminent in the near future.
A breakout above 5972 is anticipated to pave the way for the next resistance level of 6050-6155 shortly. Otherwise, any decline towards 5820-5780 is likely to present a buying opportunity.
On the downside, support is at 5690, and momentum is expected to remain bullish, unless crude oil prices close below this level.
Until then, Happy Trading!
Commodity Samachar Securities
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