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There was a drop in oil prices

The United States removed former Venezuelan President Nicolás Maduro from its sanctions list. Former state treasurer Carlos Erik Malpica Flores was blacklisted in 2017 for threatening democracy. According to Al Jazeera, the US eased sanctions against former Venezuelan President Nicolás Maduro just a few weeks after announcing plans for mediated talks between Maduro’s government and the US-backed Venezuelan opposition.

The oil is ready to be transported from Venezuela to Europe

According to the company Refinitiv Eikon, the first shipment of Venezuelan oil to Europe in the last two years is being prepared for transportation on a cargo ship with a capacity of 650,000 barrels, which was leased by the Italian company Eni.

In May, the US Department of State officially issued the Italian company Eni and the Spanish company Repsol permission to further extract Venezuelan oil in order to pay billions in debts and dividends owed by this OPEC country.

According to the document and the source, it is expected that the pipeline will be sold to the Venezuelan company PDVSA this month, while the company Eni has the option of selling oil to the Spanish company Repsol for its refineries in Cartagena and Bilbao.

Global growth is slowing down, a drop in oil prices is possible

In general, it can be stated that the prices of WTI oil experienced a sharp increase, which started at the time when the prices reached their bottom in 2020. After the global epidemic, the demand for travel was reduced, which caused a drop in the price of gasoline to a level not seen for a whole decade. Since then, prices have been rising as a result of similar isolation, other government stimulus and geopolitical concerns in Europe.

The world’s central banks have tightened monetary policy as a result of one of the world’s highest inflations in the last decade. In order to control rising prices, they had to limit the growth of annual interest rates and stop the purchase of government bonds. Forecasts of real global growth for the year 2022 are dreaming, which is not at all surprising. We could see year-on-year growth of 3.2% compared to the 4.5% growth forecast at the end of 2021.

Oil has fallen, the question is whether it is a trend or a boom

How will the oil price develop? Let’s look at the American WTI oil (to which the Brent oil is classically linked, its price is a basis for the prices in Europe). In the first half of the year, analysts spoke of two stages of price development in the event of continued Russian aggression against Ukraine. They showed that without the sanctions against Venezuela we would have reached new price peaks for oil.

WTI oil price, November 2022. (Source: tradingview.com)

After the sanctions were lifted, as can be seen from the next chart, however, the price of oil took a downward trend, broke the wave of resistance after the invasion and reached the price of 104 USD

WTI Oil Price (Source: tradingview.com)

If there is a nice upward support line on further development, we would probably witness a test market in the form of support before the invasion. And if it is broken even in the change of the support level, given the limits on which the eyes of the experts are fixed, it should become a kind of support level at the level of around 82 USD per barrel.

Comment from CapitalPand chief analyst Jozo Perie

Jozo Peri

After studying at the University of Zheb, she developed into a respected businesswoman with a long work history in the financial services industry. An experienced financial and investment analyst with Advanced CySEC Certification, since 2019 management is responsible for portfolio management at BCM Begin Capital Markets CY Ltd. He is also the main analyst of the broker CapitalPand.

Capital Panda

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