WTI marches towards $90.00 on potential supply cuts by OPEC
|- Oil prices are attempting to kiss the immediate hurdle of $90.00 amid escalating supply cut fears.
- Eurozone may substitute oil for energy to mitigate the requirement of energy to some extent.
- The announcement of lockdown curbs in China to corner Covid-19 has trimmed the overall demand.
West Texas Intermediate (WTI), futures on NYMEX, is displaying a subpar performance after a gap-up opening on Monday. The black gold has turned sideways led by the unavailability of upside momentum due to reversal hacks. The asset is oscillating in a range of $87.70-88.60 and is expected to march towards the round-level resistance of $90.00.
Oil bulls have gained decent traction as the announcement of production cuts seems on cards in the OPEC meeting on Monday. The cartel has already signaled for production cuts to offset the recent decline in oil prices. For the oil cartel, weaker prices are always considered an imbalance as they generate lower revenues for oil-exporting nations. Therefore, the oil cartel prefers to keep oil prices higher in order to accelerate revenues.
On the demand front, the deepening energy crisis in eurozone after Moscow halted energy supply for an indefinite period is expected to step up oil demand. The old continent is expected to tap oil as a substitute to mitigate the oil requirements. It is worth noting that the winter season is arriving sooner and higher energy stockpiles are required to cater to the pump-up demand.
Meanwhile, the resurgence of Covid-19 in the world’s second-largest economy and the world’s largest oil importer, China has trimmed overall demand prospects. The adaptation of lockdown curbs to contain the spread has forced restrictions on the movement of men, materials, and machines will result in deprived oil demand ahead.
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