WTI falls below $100 again on optimism over Russia-Ukraine peace talks

• Oil traded with a bearish bias on Friday amid optimism over Russia-Ukraine peace talks and focus on releasing crude oil reserves.
• WTI fell below $100 a barrel and hit new weekly lows below $98.00, with bears targeting March lows at $93.50.

oil prices continued to trade with a bearish bias on Friday, with WTI futures of the first month falling to new weekly lows below $98.00 as traders digest the recent announcement of a major release of US crude oil reserves (1 million barrels per day for six months) and further tightening of the confinement measures in the main Chinese economic zone of Shanghai. Recent positive comments from Russian Foreign Minister Sergey Lavrov regarding progress in Russia-Ukraine peace talks also weigh on oil as geopolitical risk premiums are further reduced. Having found resistance at its 21-day moving average (DMA) in the $108 area earlier in the week, WTI is now testing its downside 50-DMA at $98.50.

Member nations of the International Energy Agency recently began a meeting and there is speculation that other major oil-consuming nations may also announce releases of crude oil reserves along with the US. US President Joe Biden he said this could equate to another 30-50 million barrels of immediate supply. If confirmed, further news flow related to crude oil stockpile releases could inject more pessimism into crude oil markets, with a test of the March lows at $93.50 on the cards.

But as was the case in March, longer-term bulls may see any decline towards $90 as a good buying opportunity. Commodity strategists noted that US crude oil stockpile releases in the coming months will not be enough to offset the loss of up to 3 million barrels per day in Russian supply as a result of sanctions. Meanwhile, OPEC+ this week resisted calls to increase production at a faster pace than the usual 400,000 barrels per day per month, suggesting the group is not eager to ease global supply shortages.

Meanwhile, OPEC+’s difficulties in raising output in line with its own production quota increases were on display again on Friday after a Reuters survey found output rose by just 90,000 barrels a day month-on-month in March, very below the target of 400,000. That meant the group’s compliance with its own supply cut pact rose to more than 150% from 136% a month earlier. Commodity strategists argue that against the backdrop of OPEC+ production difficulties and Russian supply shutdowns caused by sanctions, global oil markets will remain extremely tight for the foreseeable future, suggesting that a Structurally higher WTI (ie near or above $100 per barrel) is very likely.

Technical levels