Oil slides from session highs but holds in positive territory

Oil prices have been supported by expectations gas prices would leap in Europe and WTI rallied to a high of $90.37 from a low of $87.06 with the European energy crisis dominating news as the gas supply from Russia has been halted indefinitely. 

Meanwhile, OPEC+ met on and was expected to keep oil output quotas unchanged for October if not only a small production cut to bolster prices that have slid due to fears of an economic slowdown in Europe and China which is suffering from lockdowns due to COVID-19. 

''Crude oil prices are revealing an extremely damaged microstructure, featuring vanishing liquidity with open interest and net speculative positioning declining to multi-year lows, contributing to wild price swings. On the surface, energy prices are melting as we stare down the barrel of a recession, with Chinese demand continuously at risk from the nation's zero-covid strategy,'' analysts at TD Securities explained. 

As for OPEC, the cartel modestly cut oil production by 100,000 barrels a day, rolling back the increase they approved a month ago with the group being determined to defend a price level of around $100 a barrel. ''OPEC Plus is also demonstrating that it is willing to shrug off the entreaties of the Biden administration, which has been lobbying Saudi Arabia, the United Arab Emirates and other oil producers to increase output to help bring down the price of gasoline, in part to avoid a backlash against the war in Ukraine for causing higher energy prices,'' the New York Times reported. 

Elsewhere, the Iran nuclear deal is a wildcard for oil markets. The analysts at TD Securities explained that there us potential to put an end to the pandemic-era bull market by substantially adding to the world's spare capacity, thereby allowing other producers to play catch-up.

''However,'' they say,  ''US most recently raised doubts that an agreement can be reached by characterizing Iran's latest response as 'not constructive'. Further, any potential resolution appears plagued with legal and political risks which blur the outlook. What is more clear, is that failure to reach a deal would likely translate into a sharp repricing of supply risk premia, which should once again begin to insulate energy prices from a downturn in demand.''