Western leaders are reducing their dependence on Russian oil imports slowly.
The DXY is steady at 99.00 ahead the Fed’s monetary policy announcement.
Futures on NYMEX West Texas Intermediate (WTI) are currently trading at $95.00, but will likely be more volatile due to a promise for higher oil supplies by the OPEC cartel as well as rising Covid-19 cases from China.
Oil prices have fallen as a result of the promise to pump more oil from the OPEC cartel to meet the US President Joe Biden’s demand to correct the demand-supply imbalance. After the US placed sanctions against Russia, the US encouraged the latter to act. Moscow’s invasion in Ukraine forced the US to limit oil supplies from Russia, while other Western leaders chose gradually to decrease their dependence on Russian oil imports. After a rapid rise to $126.51 on March 8, oil prices have stabilized.
The Chinese government has taken measures to limit movement of people, machines, and materials due to the increasing incidence of Covid-19 in China. To contain the Covid-19 epidemic, a lockdown was announced in Shenzhen. This restriction could increase China’s oil imports. It’s worth noting, however, that China is the largest oil importer in the world. A reduction on China’s oil imports will likely cause oil prices to drop.
The US Dollar Index (DXY), has fallen to 99.00, despite growing confusion over the Federal Reserve (Fed) interest rate decision. A Fed interest rate increase will reduce liquidity injection to the economy. This could lead to a reduction in manufacturing and ultimately, oil consumption. A confluence of several macro factors could lead to further weakness in oil prices.
