Brent crude dipped to fresh February lows in the $91.20 area earlier on Wednesday
Oil prices failed to extend the bounce as the $97 mark acted as local resistance that sent the barrel lower again. As a result, Brent crude dipped to fresh February lows in the $91.20 area earlier on Wednesday before bouncing back above $92 a barrel in recent trading.
Volatility in the oil market remains elevated, with demand-related concerns capping bullish attempts. Brent still holds below the $100 psychological level, also threatening the $90 mark, a break below which would pave the way towards $88 a barrel.
Earlier in the week, oil prices rallied in the aftermath of the OPEC+ meeting as the alliance members agreed to a small production cut of 100,000 barrels per day to bolster prices. However, the ascent waned quickly as traders opted to take some profit after a brief jump. OPEC+ also agreed they could meet any time to adjust production before the next scheduled meeting on October 5.
On the negative side, expectations of more interest rate hikes, COVID-19 restrictions in top crude importer China, and worries about a global economic recession keep pressuring oil prices, with demand worries remaining in the market focus. Adding to selling pressure, fresh economic data out of China showed earlier today that the counrty’s exports and imports lost momentum in August. Crude oil imports fell 9.4% in August from a year earlier.
In the short term, the market could be affected by the API and EIA data due on later today and on Thursday, respectively. Should the reports reveal a solid decline in US crude oil inventories over the last week, oil may receive a short-lived boost. However, traders will remain cautious, with the overall upside potential limited at this stage.