- Oil continued its historic rally on Wednesday, with WTI rising as high as $112.40 to eclipse 2014 highs.
- Traders are realizing that tough Western sanctions against Russia are disrupting global oil flows.
- Since then, prices have pulled back a bit to around $110, but are still up over $3.0 on the day.
oil prices continued their historic surge to the upside on Wednesday, with WTI futures of the first month rising to $112.40 to hit 2014 highs around $112.20 and a test of decade highs just below $115.00. Since then prices have pulled back a bit and touched $110 but is currently trading at $109.50, still up around $3.0 on the day, taking current weekly gains to over $17.00.
The collapse in crude prices has been fueled by the realization since the beginning of the week that the harsh financial sanctions put in place by Western nations against Russia for its invasion of Ukraine are likely to prove highly damaging to global oil flows. Reuters analysts said on Wednesday that “Russian oil trade was in disarray as producers postponed sales, importers rejected Russian ships and buyers around the world looked elsewhere for crude due to Western sanctions.”
The financial press reported that oil buyers are avoiding oil from the CPC pipeline (providing 1.0% of the world’s supply) that passes through Kazakhstan due to sanctions concerns. Market commentators noted that Russia’s main Urals oil benchmark was offered at a record discount to peers on Wednesday but has yet to win any bidders. According to Energy Aspects, an energy consultancy, 70% of Russian crude trade is currently “frozen” as a result of bank sanctions, higher freight rates and political risks.
OPEC+ agreed to go ahead with a production quota increase of 400,000 barrels per day in April as expected, news that had no impact on the crude oil market, just as traders ignored an announcement by OPEC member countries. the International Energy Agency a day earlier. that 60 million barrels of oil reserves would be released. “The next frontier for oil prices will be defined by prices looking for demand destruction,” analysts at RBC Capital Markets said. “Two weeks ago, our $115 per barrel forecast for the summer looked aggressive, in light of the ongoing tightening fundamental framework, infused by geopolitics, there may be more upside risk,” they continued.
Additional technical levels
Source: Fx Street
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