Earlier in the day, oil dropped on demand worries as China continued to flip the on-off button on lockdown restrictions. A new flare-up in cases in Shanghai is presenting lockdown concerns and WTI crude fell to near $120.00 in Asia trading.
But buyers held on near the figure level, alongside the 100-hour moving average at $120.27 at the time, before pushing back higher in European morning trade. WTI crude is now up $1 or 0.8% to $122.50 at the highs for the day:
At this point, I feel like I’ve been writing this same headline one too many times already. I don’t want to keep beating a dead horse but it is remarkable that oil has managed to stay as resilient as it has in the past two months. The bullish case is certainly frightening if you consider the headlines that oil has braved through in recent weeks.
My points from last month (when prices were at $107):
“I think one key argument that not many people are raising is that there continues to be a shortage in supply and the situation is likely to get worse amid the supposed transition to green energy. The fact there is underinvestment in the sector and falling inventories continue to allude to a tighter market in general.
“Throw in the fact that Russia supplies are being phased out with little to no immediate substitutes, the tighter market outlook is going to stay for longer. The capacity shortage and the fact that OPEC+ is also not doing much more than they are now isn’t going to help alleviate sentiment on that front either.
“When you weigh up those factors and see how resilient oil prices have been as of late. It’s rather scary to imagine where prices might end up once we get over this hump.”