WTI finds solid floor above $100 as traders monitor Russia supply risk, OPEC+ underproduction

• WTI has stabilised in a thin $102-$106ish range and at current levels in the $103.00s trades broadly flat.
• WTI has found a decent floor above $100 again after a rollercoaster week as traders mull Russia supply risk.
• More evidence of OPEC+ undershooting its output quotas (in February) are contributing to fears of a near-term shortage.

Front-month WTI futures have stabilised in a $102-$106ish per barrel range on Friday amid a comparatively quiet end to what has been a rollercoaster week. Prices were sent crashing as low as the $93.00s from near $110 amid China lockdown fears as the country’s zero-Covid approach struggles to contain Omicron, but has since regained a solid footing back above $100 amid continued worries about crude oil shortages as a result of Western sanctions on the Russian economy. Momentum towards a new nuclear deal between major Western powers and Iran also seems to have waned somewhat.

At current levels in the $103.00s, WTI is trading flat on the day but remains on course to post an on-the-week drop of more than $5.0, which would mark a second successive weekly loss. While prices do remain substantially lower versus last week’s highs in the $130 area, WTI currently still trades with a gain of more than $11.00 since Russia’s invasion of Ukraine. In the absence of an announcement of a Russo-Ukrainian peace deal, which still appears to be some way off, analysts suspect risks remain tilted to the upside for oil.

According to a Reuters report on Friday, OPEC+ continued to undershoot its output quota in February and by an even larger margin than in January. Meanwhile, the major OPEC nations with space capacity (Saudi Arabia and the UAE) haven’t shown signs this week of caving to pressure from major oil importers (like the US) to increase output at a faster rate, despite the fact that, according to the International Energy Agency, oil markets could lose as much as 3M barrels per day in supply from Russia from April. All signs point to WTI continuing to trade at elevated levels for the foreseeable future as supply adjusts higher from non-Russian sources, which will take time.