FIS: Crude Oil Market Overview: EU to finalise Russian oil ban
Crude oil prices rose slightly as the European Union renewed pressure for a Russian oil embargo with or without the full consensus of its members.
Hungary had opposed the proposal, asking for more energy investments before agreeing to a full embargo.
The country was given two years to phase out Russian energy products, unlike the six months given to other EU members, except for Czechia and Slovakia, which were heavily dependent on Russian oil.
Currently, the EU bloc receives around 25% of its oil supplies from Russia, but the Russia-Ukraine conflict changed the EU’s stance as they tried to avoid sourcing oil and gas from Russia.
Meanwhile, US gasoline prices continued to spike in view of the summer driving season and falling gasoline inventories.
According to the American Petroleum Institute (API), US gasoline stocks dropped by 5.1 million bbls by mid-May. Similarly, the Energy Information Administration (EIA) also recorded a drawdown in gasoline stocks but by only a small drop of 100,000 bbls last week.
To cool the price spike, the US is trying to ask oil-producing countries like Saudi Arabia and the UAE to increase output before an arranged diplomatic meeting in June.
Some trade participants think the easing of stocks would take a while, with the market only starting to feel the effect of more supplies later in July.
There had also been some optimism over China’s relaxation of its covid measures by June, which will improve Chinese oil demand.
Beijing policymakers had also introduced new investment projects, broaden tax credit rebates, postponed social security payments, and loan repayments to bring its economy back on track.
The Chinese government will provide tax credit rebates to more sectors and increase annual tax cuts by more than RMB 140 billion or $21 billion overall to RMB 2.64 trillion, based on media sources.
Moreover, Beijing policymakers also issued bonds worth RMB 200 billion to support the aviation sector with an additional RMB 150 billion in emergency loans and the issuance of RMB 300 billion bonds to finance railway construction.
Technical view of the crude oil market:
July Futures – The futures held with support last week, resulting in the price trading above the USD 114.84 resistance, and taking the technical into bullish territory.
Having made a new high (USD 115.69), the futures traded back into the EMA support band (low USD 105.70) before trading up to USD 114.34 today (23/05/22).
Technically bullish based on price, the longer-period EMA’s remain flat and compressed, implying a lack of trend in the market. Upside moves that trade above and hold above the USD 115.69 fractal resistance will target the USD 123.74 level.
Likewise, downside moves that trade below USD 105.70 will warn that the USD 101.30 fractal support could be tested. Price action is bullish, and the trend is neutral, suggesting we need to see more from the futures to convince the market we are going to see a more sustained run.
Written by Edward Hutton, Edited by Chris Hudson (https://freightinvestorservices.com/fis-live/).
