WTI rallies more than $5.0 to reclaims $100 per barrel mark, test its 50DMA

• WTI rebounded back above $100 per barrel to test its 50DMA on Tuesday, gaining more than $5.0 on the session.
• Traders cited risk-on flows, easing China lockdown fears and geopolitics as bullish for the price action.

Oil prices have seen a strong rebound thus far this Tuesday, with front-month WTI futures retaking the $100 per barrel mark and testing the 50-Day Moving Average in the $100.50s. At current levels, WTI trades with gains of more than $5.0 on the day, easily making up for Monday’s slightly more than $2.50 loss, and is now nearly $7.50 higher versus Monday’s lows near $93.00.

Traders are citing a reduction in China demand concerns as Shanghai eases lockdown restrictions for some 7,000 residential units as supportive to the price action, as well as geopolitics after Russian President Vladimir Putin spoke negatively on Russo-Ukraine peace talks. There is also no doubt that an improvement in the market’s broader appetite for risk in recent trade that is seeing US equities rebound and the US dollar come under modest selling pressure is also helping crude oil.

The improvement in risk appetite was triggered by the latest US Consumer Price Inflation data showing that Core price pressures didn’t rise as much as feared last month. If WTI can break back to the north of 50DMA at $100.50, that would open the door to a run towards its 21DMA in the $103.00s.

Though fears of an acute near-term oil shortage as a result of sanctions-related disruptions to Russian exports after its invasion of Ukraine have eased in wake of recent reserve release announcements from the International Energy Agency, supply concerns linger. OPEC warned on Tuesday that it would be impossible to replace the loss of 7M barrels per day in Russian oil and oil product exports in case of sanctions or voluntary embargoes.

So far, Russia has been able to continue selling oil to major Asian customers, but India is showing signs of caving to US pressure to no longer buy Russian. Reportedly, the Indian Oil Corp (IOC) has removed Russia’s Ural grade crude oil from its tender list for its next major purchase. US President Joe Biden had spoken with Indian PM Narendra Modi on Monday and warned that buying Russian oil was not in India’s best interests.

Meanwhile, the EU is still buying Russian energy products (oil and gas) given its heavy reliance and leaders/lawmakers remain divided about whether to implement a full embargo. Oil traders should keep an eye on reports that Russian forces recently used chemical weapons in Mariupol. Western intelligence is yet to confirm these reports, but if they do, this will strengthen the argument for a full EU embargo, which should be bullish for crude.

Ahead, weekly US private API crude oil inventory figures are scheduled for release at 2130BST and could, as usual, lead to some short-term volatility in WTI. But traders are likely to remain more focused on the broader themes of geopolitics, China lockdowns and risk appetite.