WTI eases back into $103.00s in quiet pre-long weekend trade

• WTI has fallen slightly into the $103.00s in quite pre-long weekend trade.
• For now, WTI above $100 seems to make sense given expectations of tight global market conditions amid Russia supply outages.

Trading conditions have been fairly thin in global oil markets on Thursday amid a slowdown in relevant newsflow and as traders wind down ahead of a long weekend in major North American and European markets. Front-month WTI futures have dipped a tad to trade in the $103.00s, a little below Wednesday’s peaks for the week in the $104.00s.

For now, the 21-Day Moving Average at $104.15 is acting as a ceiling to the price action and this is likely to remain the case for the remainder of the week. For now, traders seem to view crude oil slightly above the $100 level as broadly making sense. Market conditions are expected to remain tight over the coming months as global oil markets adjust to significant disruption to Russian exports as a result of sanctions over the country’s invasion of Ukraine.

The International Energy Agency (IEA) earlier in the week forecast a loss of 3M barrels of Russian crude oil per day from May (roughly 3% of global supply) as a result of sanctions and buyers voluntarily shunning Russian crude oil grades. This is the major reason why dips back into the $90s per barrel in WTI continue to be bought.

However, the outlook for a return to last month’s peaks in the $120s has been dampened by recent announcements by IEA members nations of a historic crude oil reserve release amounting to 240M barrels over the next six months. Other factors to consider are the potential for a return to the market of more than 1M barrels per day (BPD) in Iranian supply if the US and Iran can hash out a new nuclear pact to ease sanctions.

For now, though, talks remain deadlocked, with traders also monitoring the prospect for increased output from the US, Venezuela and OPEC+ nations, who for now are sticking to their policy of 400K BPD/month output quota hikes. Other factors on oil traders radars include the demand side as global growth slows and the threat of wider lockdowns in China remaining ever-present.