WTI stabilises in $94.00 area as traders monitor Eastern European geopolitics, mull ongoing OPEC+ undersupply

• WTI has stabilised just under multi-year highs in the $93.00s as traders monitor Russia/Ukraine/NATO tensions amid elevated fears of war.
• Tight global market conditions amid continued OPEC+ undersupply versus their own output quotas is another factor supporting prices.

Crude oil markets stabilised on Monday after printing fresh seven-year highs earlier in the day, supported by the ongoing tense geopolitical backdrop in Eastern Europe and continued tight global oil market conditions. Front-month WTI futures, which have swung between multi-year highs near $95.00 and session lows just above $92.00, currently trade in the $94.00 are and are close to flat on the day. The situation surrounding Russia/Ukraine/NATO tensions and the prospect of military action by the former against Ukraine remains highly uncertain and confusing.

For now, diplomacy continues, with Western powers and Ukraine eager to remain and Russian Foreign Minister Sergey Lavrov on Monday recommending to Russian President Vladimir Putin that he continue with negotiations for now. Citing US intelligence, US press has been reporting in recent days that a Russian attack against Ukraine could come as soon as this week. With German Chancellor Olaf Scholz visiting Moscow to meet with Putin on Tuesday, most see an attack prior to then as unlikely.

“Market participants are concerned that a conflict between Russia and Ukraine could disrupt supply,” said analysts at UBS. They added that this is of particular concern to markets because global oil inventories and producer spare capacity are already very low. Indeed, OPEC+ undersupply that has drained global inventories has been one of the major factors behind WTI’s stunning near 25% rally on the year. The group was revealed to have missed its January output quota by 900K barrels per day and International Energy Agency head Fatih Birol on Monday urged the cartel to close this gap.

“If Russia invades Ukraine, crude oil and natural gas prices can be expected to surge significantly… Brent would probably exceed $100 per barrel” said analysts at Commerzbank. Elsewhere in notable geopolitical themes for oil markets to take note of, indirect US/Iran talks are ongoing, though there are no signs of any breakthrough just yet, with talks having now nearly stretched out for one year. A deal could release well over 1M barrels per day in exports to global markets, which could offer some welcome easing to the current massive global supply deficit.