WTI slumps back to $93.00 area as US/EU sanctions avoid Russian energy, Biden signals SPR release

• WTI fell back to near $93.00 having spiked as high as $100 earlier in the session as Russia invaded Ukraine.
• US and EU sanctions have for now avoided the Russian energy sector, easing supply disruption concerns.
• President Biden also said the US would release oil from the SPR.

Oil markets saw the most intra-day volatility since in nearly three months on Thursday, with front-month WTI futures surging over $8.0 to above $100 for the first time since 2014, only to then drop all the way back to $93.00. The initial surge in crude oil prices was triggered as Russia launched a full-scale military assault on Ukraine during Thursday’s Asia Pacific session on fears that subsequent economic sanctions from the West would lead to global oil supply disruptions.

Analysts at UBS noted that Russia is the world’s third-largest producer and second-largest exporter of crude oil. “Given low inventories and dwindling spare capacity, the oil market cannot afford large supply disruptions” they said. But concerns about global supply disruption eased later in the session as it become clear that US and EU sanctions on Russia would not target its energy sector, resulting in the sharp pullback.

US President Joe Biden also said that the US would release oil from its Strategic Petroleum Reserves to ease supply shortage concerns, news which when combined with a larger than expected build in weekly US oil inventories, weighed on prices. Despite Thursday’s more than $9.0 intra-day swing, analysts largerly remained of the conviction that oil prices would remain well supported moving forward.

The Russia/Ukraine conflict will likely intensify in the coming days and tensions between Russia and NATO are set to remain at multi-decade highs, suggesting that the significant geopolitical risk premia that remain priced into crude oil likely isn't going anywhere anytime soon. One alternate theme for investors to watch is signs of further progress in nuclear negotiations between the US and Iran.

Iran’s top security official on Thursday was upbeat on the prospects of finding a good deal with Western powers following recent progress. A deal could see the US lift sanctions on Iranian exports that analysts have said could free up 1.3M barrels in supply to global markets.