• Oil prices are trading around $118.00 as investors wait for a new trigger.
  • The growing odds of a demand recovery in China will keep the bulls in control.
  • OPEC+’s promise to pump more oil is unable to offset Russia’s oil exports.

West Texas Intermediate (WTI), the futures on NYMEX, extended their consolidation amid the unavailability of any potential trigger that could dictate the direction of oil investors. Oil prices turned sideways towards $118.00 and are eyeing a potential catalyst as supply issues are expected to push the asset north.

Oil prices rose sharply on expectations of a recovery in demand in China. The Chinese administration has withdrawn the containment measures imposed on Shanghai and Beijing to contain the spread of Covid-19. This has resumed the regular use of oil for transportation and economic activities, which will restore previous demand levels in the future.

On the supply front, the American Petroleum Institute (API) reported an unexpected increase in oil inventories of 1.845 million barrels. However, this will have minimal impact on oil prices as supply issues gallop on a broader note. OPEC+ has promised to inject more oil into the global supply to neutralize the oil supply shortage caused by various Western leaders banning oil imports from Russia.

Given Russia’s bulk oil exports and OPEC+’s promise to add 648,000 barrels of oil, the oil cartel is unable to solve the oil shortage. Moreover, market participants cannot count on additional oil promises from OPEC+, as the majority of oil-producing countries are operating at full capacity, leaving less room for increased oil production.

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