WTI rebounds towards Wednesday’s multi-year highs from earlier sub-$87.00 lows as oil market remains bullish

• WTI has pushed higher from earlier sub-$87.00 lows to trade in the mid-$88.00s, up about 50 cents on the day. 
• Oil has shrugged off equity market downside and hawkish BoE/ECB policy meetings to remain supported close to multi-year highs. 

Oil prices have shrugged off earnings-related downside in the global equity space on Thursday, as well as more hawkish than expected BoE and ECB policy meetings, to remain supported close to multi-year highs. Front-month WTI futures have recovered from an earlier session dip below $87.00/barrel to hit session highs above $88.50 in recent trade, with the bulls eyeing a test of Wednesday’s post-OPEC announcement highs near $90.00. At current levels just under $88.50, WTI trades with gains of about 50 cents on the day. 

Recall that the group opted to stick to its existing policy of increasing output at a measured pace of 400K barrels per day (BPD) each month in March. This disappointed some market participants (like Goldman Sachs) who had been calling for the OPEC+ to increase output at a quicker rate amid high oil prices and pressure from oil-importing nations, hence the rally in prices towards $90.00 at the time. 

An explosion on a Nigeria oil-producing vessel with a daily capacity of 22K BPD, while not marking a significant interruption to global supply, highlighted some of the struggles that smaller oil-producing nations like Nigeria (and Angola, Libya etc.) have been having in recent months in keeping up with rising OPEC+ output quotas. OPEC+ compliance to their output pact stood at 122% at the end of December, a Reuters survey revealed recently, largely due to the struggles of smaller producers.   

Traders on Thursday also cited expectations for a winter storm to arrive in the US, thus increasing energy demand there, and Wednesday’s bullish weekly US EIA crude oil inventory report as supportive of crude oil prices. But more broadly, against a backdrop of recovering global demand as the spread of Omicron eases (in developed markets, at least), tight supply (thanks largely to OPEC) and elevated geopolitical risk (thanks to the Russia/Ukraine crisis) oil markets remain in a bullish mood. A break above the $90.00 level for WTI could see the American benchmark for sweet light crude then surge to the next major area of resistance in the $91.50 area in the form of the January 2014 lows.