A Touch Firmer Overnight

WTI is +$2.50 and Brent is +$2.00 at writing, printing ~$120.90 and ~$125.20, respectively. Both benchmarks have risen from session lows, with the market continuing to focus on reports that U.S. legislators are considering a unilateral embargo on Russian crude imports.

• Still, crude continues to trade below Monday’s best levels, as participants assess the likelihood of combined sanctions on Russian crude (i.e. from the U.S., Europe, and Japan), with strong resistance to an immediate full embargo from the likes of Germany.
• Note that oil production at Libya’s Sharara oilfield (the country’s largest, accounting for over 300K bpd of output) reportedly resumed, removing some of the risk premium that had developed earlier on Monday. However, that doesn’t do much to alter the wider supply picture. Global oil supplies remain tight, as well-documented difficulties in the sale of Russian oil continue to play out. On the impact of a total embargo on Russian oil imports, OPEC Secretary General Barkindo remarked on Monday that “there is no capacity in the world that could replace 7 million barrels per day”, underscoring how OPEC will likely not be able to make up for the resulting shortfall. Mr Barkindo also cast doubt on the effect of “demand destruction” amidst elevated crude prices, stating that “supply is increasingly lagging behind”.
• Participants will also be keeping an eye on developments in U.S.-Venezuela talks despite little sign of progress so far, with RTRS source reports suggesting that the Biden administration is considering easing sanctions on the country’s crude exports, mainly to diversify global reliance on Russian crude.
• From a technical perspective, recent cycle highs for WTI and Brent have reinforced the bullish trend, with resistance located at their Mar 7 highs of $130.50 and $139.13 respectively, while support is seen at $105.18 (Mar 2 low) for WTI, and $106.83 (Mar 2 low) for Brent.