WTI “melt-up” accelerates, hits fresh seven-year highs above $93.00/barrel and on course for seventh successive weekly gain

Oil bulls put their foot on the accelerator on Friday, driving prices to fresh seven-year highs and leaving major crude benchmarks on course to post a seventh successive week of gains, with trading conditions increasingly resembling that of a “melt-up”. Front-month WTI futures surged nearly $3.0 on the session easily surpassing resistance in the mid-$91.00s and even hit the $93.00 level. That takes WTI’s weekly gains to close to $6.0 (nearly 7.0%) and the seven-week run of gains to more than 30% (recall WTI was trading around $70/barrel in mid-December).

Familiar themes were cited as behind the ongoing upside in oil prices; the winter storm that recently hit the US and sent temperatures plummeting, geopolitical tensions between Ukraine, Nato and Russia. A few analysts highlighted concerns that the US storm might impact US shale output in the Permian Basin. Market commentators also highlighted fresh evidence of OPEC+ struggles to lift output/exports; recent data showed Iraqi output in January was well below it allowed quota under the existing OPEC+ pact and Kazakhstan reportedly wants to keep more of its output at home to lower domestic prices and ease civil tensions.

“It may just be a matter of time until we're closing in on triple figures” remarked one analyst at OANDA. Commerzbank on Friday upped its Q1 2022 oil price forecast to $90/barrel from $80 before. However, Citi cautioned that the oil market may soon revert back into surplus, perhaps as soon as next quarter and recommended selling the Brent crude future for December delivery on the anticipation of crude oil build later in the year.