WTI ends the week historically volatile, weakening below $110

• After a historically volatile week, WTI is more moderate on Friday, capped below $110 but supported above $104.
• WTI is on track for a weekly drop of more than $7.0, which would be its worst one-week performance since November.

world oil markets they appear poised to end a historic week of global energy-related developments and volatility in a comparatively subdued manner. On Friday, the WTI futures of the previous month, which rose as high as $130 a barrel earlier in the week, remained capped below $110, but also held above previous weekly lows in the $104 area. It now trades around the $108 zone, with daily gains of around $2.0, but is on track to post a weekly drop of more than $7.0, which would be its worst single-week performance since November.

Oil markets were hit by a barrage of major developments this week. The US announced a ban on all Russian energy imports, the UK announced plans to phase out imports by the end of the year, and the EU is working on a strategy to significantly reduce its exposure to Russian energy imports in the next years. While these headlines exacerbated concerns about oil shortages, with major Western oil buyers already avoiding Russian exports, they also focused a lot on where new supply might come from.

Comments from Western and Iranian officials suggest a deal to revive the 2015 nuclear pact is nearing completion, but new Russian demands this week meant talks stalled, slowing progress towards a deal that could lead to more of 1.3 million barrels in Iran. Crude exports return to global markets. Europe’s top diplomat said on Friday that talks on the near-complete deal were now “on hold.” The US and its other major oil-consuming allies are putting pressure on OPEC members with spare capacity (Saudi Arabia, the United Arab Emirates and Iraq) to increase production and ease the global supply squeeze.

While mixed messages from UAE officials this week suggested there is an ongoing debate (the UAE ambassador to the US said the country would push for further OPEC+ production growth), Saudis have not yet yielded. The US is also trying to reach a deal with Venezuela in which sanctions are lifted to allow direct exports to the US, while officials are also looking at ways to increase domestic production.

For now, the markets seem to be in something of a state of confusion about 1) how much Russian oil supply is being lost and 2) how much supply can quickly come online from elsewhere. Until this clears up, trading conditions are likely to remain historically volatile, with some analysts predicting further large price gains and others calling for a top.

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