WTI faces barricades above $88.00, upside remains favored amid supply worries
- Oil prices are expected to remain in the upside trajectory amid soaring supply worries.
- Biden’s administration may use oil from SPR to offset the impact of OPEC’s production cuts.
- The continuation of the current pace of hiking rates by the Fed will drop the oil demand projections.
West Texas Intermediate (WTI), futures on NYMEX, have surrendered the immediate hurdle of $88.00 and are oscillating lower after four consecutive bullish trading sessions. After a juggernaut rally, a minor correction seems to be a sign of long liquidation and the continuation of the upside is highly biased for now.
Accelerating supply worries after OPEC+ announced the biggest production cut since the Covid-19 pandemic has infused adrenaline rush into the oil bulls. The oil cartel will cut its entire production by two million barrels per day (bpd) from November. It is worth noting that many OPEC players have failed in meeting their sanctioned quotas due to limited production capacity, therefore, the impact could dwindle.
US President Joe Biden has been criticizing the additional production cuts by OPEC and its allies as he believes that global economic fundamentals are unable to support the production cut for now. News wires from the White House narrate that Biden’s administration would use oil from Strategic Petroleum Reserves (SPR). This might offset the impact of OPEC’s production cut to some extent.
Going forward, the minutes of the US Nonfarm Payrolls (NFP) will be keenly watched. The extent of decline or additions will indicate the mood of the Federal Reserve (Fed) towards the rate hike. Upbeat payroll numbers will support the Fed to continue the pace of hiking interest rates and will decline the demand for oil due to diminishing economic activities.