WTI surges above $90.00 for the first time since October 2014

Front-month WTI futures surged above the $90.00 level for the first time since 2014 in recent trade on Thursday, taking their on-the-day gains to more than $2.0, which would mark the best one-day performance in three weeks. No specific one fundamental catalyst can be singled out as behind the recent surge in prices that has seen WTi rebound more than $3.0 from intra-day lows under $87.00. but analysts/market commentators have been discussing a cocktail of bullish factors in recent days that have been supporting the bullish mood in oil markets. 

Recent bullish factors:

Demand-side

Reopening. With the spread of Omicron fading in developed countries and China's zero Covid-19 approach (for now) working, demand has been improving in recent weeks as economies reopen following winter lockdowns/remain open. Underlying demand optimism was a return to US crude oil inventory declines last week, according to EIA data released on Wednesday. 

Cold US weather. A large winter storm is expected to hit large parts of the US this week, bringing ice and snow to much of the country and increasing near-term demand for energy. 

Supply-side

Measured OPEC+ output hikes and production issues. The group agreed on Wednesday to stick to its policy of lifting output quotas by 400K barrels per day each month, disappointing some who expected a larger hike to output quotas. Even if the cartel had hiked quotas by more, markets aren't convinced the group's actual output can keep up with the quota increases; various supply problems at smaller oil-producing OPEC+ nations have been well publicised as of late and the group's compliance stood at 122% at the end of December, said a Reuters survey. 

Geopolitical risk premia. Tensions remain highly elevated between Russia, Ukraine and NATO. Some sort of military intervention by the Russians into Ukrainian seems to be the base case of many geopolitical strategists. The US and other NATO allies have pledged to hit Russia with massive sanctions if it further invades Ukraine, and the impact this will have on the country's gas and oil exports is highly uncertain.