Oil markets have recovered from Thursday’s very mild stumble and are back on the front foot on Friday. Front-month WTI futures have in recent trade been probing highs of the week and its best levels since early November above $83.00 per barrel as crude oil bulls eye a breakout towards 2021 highs in the $85.50s. Geopolitical tensions are bubbling, with the market’s perceived likelihood of a Russian military intervention into Ukraine increasing (Russian and Ukrainian dollar bonds have been getting hammered). The impact of an outright Russian invasion on global oil supply isn't clear, but Russia is one of the world’s biggest producers, pumping more than 11M barrels per day (over 10% of daily global supply).
The highly tense geopolitical backdrop isn't the only factor supporting oil prices on Friday. Indeed, there appears to be a great deal of optimism amongst banks/analysts that WTI could be headed as high as $100 per barrel in 2022. Banks and analysts have generally been citing expectations for an increasingly tight market. JP Morgan said earlier in the week that oil prices could gain $30 from here after the US Energy Information Administration and Bloomberg earlier in the week lowered their OPEC output capacity estimates for 2022 by 0.8M and 1.2M barrels per day respectively.
Meanwhile, an analyst at OANDA this week said that “assuming China doesn't suffer a sharp slowdown, that Omicron actually becomes Omi-gone, and with OPEC+’s ability to raise production clearly limited, I see no reason why Brent crude cannot move towards $100 in Q1, possibly sooner”. Analysts at PVM agree, saying “when you consider that OPEC+ is still nowhere near pumping to its overall quota, this narrowing cushion could turn out to be the most bullish factor for oil prices over the coming months.”
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