The price of crude oil (WTI) rallied after investors viewed Friday’s sell-off as an exaggerated move. Under its conditions, the OPEC + meeting on Wednesday and Thursday could cause the oil cartel to take a cautious approach.
After suffering losses of more than 13% on Friday, oil rebounded on Monday, trading almost 5% higher at the time of writing. Omicron’s varaiant-inspired Friday’s sale seems pretty far-fetched, especially since not much is known about this new strain of Covid.
Over the weekend, the World Health Organization said it would take time to understand the severity of the recently discovered and highly mutated Covid strain. However, anecdotal evidence from South Africa suggests that it may be more contagious but less serious, helping to increase the sense of risk in the market. That said, it is still early days and governments around the world are tightening travel restrictions as a precaution.
Release of strategic reserves
The latest injection of volatility into oil markets comes after the announcement of a coordinated release of strategic oil reserves by the United States earlier this month. Releasing such reserves could be unnecessary if the Omicron variant resulted in further mobility restrictions. A combination of increased supply entering the market combined with a darkening demand outlook could see the oil price It’s hard for me to win from here.
OPEC + meeting
OPEC + will meet this week on Wednesday and Thursday to decide whether to enact the planned increase of 400,000 barrels per day in the face of the planned release of strategic reserves and increased risks from Covid. The technical meeting was postponed to allow more time to assess the impact of the Omicron variant on demand.
The group should take a cautious stance on the possibility of demand weakening during the coming winter months. OPEC already warned of a possible oversupply next year, even before the Omicron discovery. The hope that OPEC + can suspend the expected increase in production is helping to drive up the price.
What’s Next for WTI Crude Prices?
WTI Crude Oil attempts a strong rebound from Friday’s low of $ 67.31, resuming its SMA-200 moving average at $ 69.75. A daily close above here would support the bulls’ case. However, the RSI remains firmly in bearish territory, supporting the case for a further decline.
Any significant rally must rebound from today’s high at $ 72.00 USD to expose the SMA-100 moving average at $ 74.00 USD.
Meanwhile, sellers will look for a move below $ 70.00 USD to retest the SMA-200 moving average at $ 69.70 USD.
By Fiona Cincotta, Forex.com » Official site
Disclaimer: The information and opinions contained in this report are provided for general information only and do not constitute an offer or solicitation regarding the purchase or sale of currency exchange contracts or CFDs. Although the information contained in this document has been taken from sources considered reliable, the author does not guarantee its accuracy or completeness, and does not assume responsibility for any direct, indirect or consequential damages that may result from the fact that someone trusts such information.
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