• Oil was trading with a bearish bias on Friday amid optimism for the Russian-Ukrainian peace talks and a focus on releasing crude oil reserves.
  • WTI fell below $100 a barrel and hit fresh weekly lows below $98.00, with bears targeting March lows in the $93.00s.

Oil prices continued to trade with a bearish bias on Friday, with first-month WTI futures falling to new weekly lows below $98.00 as traders digest the recent announcement of a major release of crude oil reserves in the United States (1 million barrels per day for six months) and a further tightening of containment measures in the greater Chinese economic zone of Shanghai. Recent positive comments from Russian Foreign Minister Sergei Lavrov regarding the progress of the Russian-Ukrainian peace talks are also weighing 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 50DMA down to $98.00.

Member nations of the International Energy Agency recently began a meeting and speculation is that other major oil consuming nations may also announce releases of crude oil reserves alongside the United States. US President Joe Biden has said that could mean an additional 30-50 million barrels of immediate supply. If confirmed, new information regarding crude oil reserve releases could inject further downside into crude oil markets, with a test of March lows in the $93.00s on the charts.

But as was the case in March, any dip into the mid or low $90s could well be viewed by longer-term bulls as a good buying opportunity. Commodity strategists have noted that the releases of U.S. crude oil reserves over the next few months will not be enough to offset the 3 million barrels per day loss of Russian supply as a result of the sanctions. Meanwhile, OPEC+ resisted calls this week to increase production at a faster rate than the usual 400,000 barrels per day per month, suggesting the group is not keen on easing the compression of global supply.

Meanwhile, OPEC+’s struggles to increase production in line with its own production quota hikes were again in evidence on Friday after a Reuters survey found production rose by only 90,000 barrels per day MoM in March, well below the target of 400,000. This means that the group’s compliance with its own supply reduction pact has increased to more than 150% against 136% a month earlier. Commodity strategists will argue that amid OPEC+ production struggles and sanctions-caused Russian supply shutdowns, global oil markets will remain extremely tight for the foreseeable future, suggesting that a structurally higher (i.e. near or above $100 a barrel) continues to make sense.

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