WTI finds solid bottom above $100 as traders watch for Russia supply risk and OPEC+ undersupply

  • WTI has stabilized in a narrow range of $102-$106 and at current levels trading at $103.00 is broadly flat.
  • WTI again found a decent bottom above $100 after a rollercoaster week as traders ponder supply risk from Russia.
  • Mounting evidence that OPEC+ understated its production quotas (in February) is contributing to fears of a near-term shortage.

First-month WTI futures stabilized in a range of $102 to $106 a barrel on Friday amid a relatively calm end to what has been a rollercoaster week. Prices fell as low as $93.00 from nearly $110 amid China lockdown fears as the country’s zero-Covid approach struggles to contain Omicron, but has since found solid footing above $100 amid continued concerns over crude oil shortages following Western sanctions against the Russian economy. The momentum for a new nuclear deal between major Western powers and Iran also appears to have waned somewhat.

At current levels of $103.00, WTI is trading flat on the day, but remains on track to post a weekly decline of over $5.0, which would mark a second consecutive weekly loss. While prices remain noticeably lower from last week’s highs in the $130 area, WTI is currently trading with a gain of over $11.00 since Russia invaded Ukraine. With no announcement of a Russian-Ukrainian peace deal, which still seems a long way off, analysts suspect that risks remain on the upside for oil.

According to a Reuters report on Friday, OPEC+ continued to understate its production quota in February and by an even larger margin than in January. Meanwhile, major OPEC nations with space capability (Saudi Arabia and the United Arab Emirates) showed no signs this week of bowing to pressure from major oil importers (such as the United States). ) to increase production at a faster rate, despite the fact that, according to the International Energy Agency, oil markets could lose up to 3 million barrels per day of supply from Russia from of April. All signs point to WTI continuing to trade at high levels for the foreseeable future as supply adjusts higher from non-Russian sources, which will take time.

Edward N. Arrington