WTI Hits New Weekly Highs at $107.50

• WTI hit fresh weekly highs at $107.50 on Friday and is targeting last week’s highs above $109.00.
• Gas tensions between the EU and Russia and the growing risk of an EU embargo on Russian oil imports have supported prices this week.
• But concerns about demand from China as the country continues to battle its Covid-19 outbreak remain a downside risk.

oil prices stay ahead of the curve as the weekend approaches, with WTI futures of the first month currently trading at weekly highs of $107.50 a barrel, up nearly $2.50 on the day and on track for a fourth straight daily gain. It is currently trading just above $107.50, on track to post a weekly gain of around $6.0. WTI bulls have last week’s highs just above $109.00 in sight, a break above which could open the door for a push towards $110.50.

The main catalyst behind this week’s rally in crude oil markets has been an increased focus on tensions between Russia and Europe regarding energy trade. Earlier in the week, Russia halted gas exports to two European countries (Poland and Bulgaria) that refused to pay in rubles, causing gas prices to spike over fears of a further blockade of Russian gas. Later, reports began to circulate suggesting that Germany had dropped its opposition to a blanket ban on all imports of Russian oil.

While an EU ban on Russian oil imports would put further downward pressure on Russia’s benchmark Ural crude oil grade, it puts upward pressure on other global crude oil grades, such as WTI, as European buyers are looking for new markets. An official announcement of a Russian oil import ban next week could be a key catalyst for WTI to move back above $110.

Amid the heightened focus on geopolitical and energy trade tensions with Russia, China lockdown concerns and the potential impact on China’s oil demand have taken a backseat. However, analysts note that if lockdowns in Beijing were to be extended in the coming days, or if Covid-19 were to spread to more major urban centers, WTI’s recent upward progress would again be at risk.

Looking ahead to next week, major central banks like the Fed will meet and likely raise interest rates, which could keep the broader risk appetite up. Further weakness in, say, US equity markets could weigh on crude prices. OPEC+ will also be in the spotlight with the group expected to stick to its current production policy of incremental production increases of 400,000 barrels per day each month once again in June. China risks aside, it seems likely that supply concerns from Russia and OPEC+’s slow approach to ramping up output should be able to keep WTI propped above $100 for now.

Technical levels