WTI stabilises in mid-$110s, with oil still well supported despite WSJ reports of Russia leaving OPEC+

• WTI is a little higher on the day in the $116s, though still below Tuesday’s near-$120 highs.
• The WSJ speculated that Russia might leave OPEC+ and some other OPEC+ might up output.
• For now, Russia/OPEC+ supply woes, tight global markets, rising summer demand in the US/Europe are keeping prices supported.

Oil prices have stabilised pulling back slightly from multi-week highs hit on Tuesday. Front-month WTI futures were last trading higher by just under $1.0 on Wednesday in the $116s per barrel, having slipped back after coming close to hitting $120 on Tuesday. The pullback was sparked by a WSJ report that some OPEC+ producers are exploring the idea of excluding Russia from the OPEC+ production pact as a result of the impact of Western sanctions over Russia’s invasion of Ukraine.

The report said that while there has not yet been a push by the rest of OPEC+ to make up for the recent fall in Russian output, some Gulf nations had begun planning to increase output in the coming months. Against the backdrop of a very tight global crude oil market as North America and Europe head into peak driving season, additional supply from OPEC+ members would be welcomed by major oil-consuming nations.

Further tightening the market in the near term is the reopening of the Chinese economy as Covid-19 infections fall and lockdowns ease. Indeed, lockdowns in Chinese megacity and financial hub Shanghai have now ended after two months. For these reasons, as well as the anticipation that Russia’s oil production woes might worsen in the months ahead after the EU agreed to phase out 90% of their imports from the nation by the end of this year, many oil bulls remain confident that prices are set to remain elevated in the near future.

Indeed, WTI marked a sixth successive monthly gain on Tuesday after posting a more than $11 gain in May to close the month in the $115s. Over the course of these six months, WTI has leapt by around $50 per barrel. That is the best winning streak in more than a decade. A significant easing of global oil supply woes plus a further slowdown in global growth will likely be needed in order to see this bull run snapped and WTI fall sustainably back below $100 per barrel.