WTI rallies towards its 21DMA in the $103.00s as downbeat geopolitical updates offer support

• Oil prices gained for a second day, with traders citing the negative tone to recent Russo-Ukraine rhetoric/developments as bullish.
• WTI rallied towards its 21DMA in the $103.00s, with the bulls eyeing a push higher towards $110.

Bullish momentum in global crude oil markets continued for a second day on Wednesday, with front-month WTI futures pushing towards their 21-Day Moving Average in the $103.60s, after prices found decent support $100 per barrel area earlier in the day. At current levels just under $103.00, WTI trade with on-the-day gains of just under $2.0, taking its weekly gains to almost exactly $5.0/barrel.

Analysts cited the lack of signs of any progress towards peace in Ukraine as supportive for oil prices, pointing to recent commentary from Russian President Vladimir Putin, who on Tuesday referred to peace talks as at a dead-end, and to the continued build-up of Russian forces in Ukraine’s east as they prepare for an assault on the unoccupied portions of the Donbas oblast.

The International Energy Agency on Tuesday said it expects Russian oil output to have dropped by 1.5M barrels per day (BPD) this month, and to drop by 3M BPD in May. The lack of progress towards peace suggests that the Western sanctions that are the main catalyst of this large drop in Russian output won’t be lifted anytime soon.

Ongoing supply concerns helped oil markets shrug off the bearish impact of a much larger than expected more than 9M barrel build in US crude oil stocks, according to the latest weekly US Energy Information Agency data. Indeed, OPEC warned earlier in the week it would not be possible to make up for the shortfall in Russian output, and US output is only expected to rise a further 200K BPD by the end of 2022 (to 12M BPD from the current 11.8M BPD).

The WTI bulls will be hoping that recent gains over the past two days represent a break out of the downtrend that has engulfed oil markets since March 24 (when WTI was trading above $110. They will be hoping for a break above the 21DMA, which could open the door to a run back towards $110.