WTI Drops From Multi-Year Highs With $88.80 In Focus

West Texas Intermediate crude oil is now down by 0.8% on the day so far, it is now traded at $91.22 after falling from a high of 92.70 to a low of 90.76.

The black gold is retreating from its highest levels in seven years as supply risk sentiment takes over amidst a blurry outlook for oil. The Biden administration has reinstated waivers to sanctions previously imposed on Iran. Signs that the Iran file is marching towards a deal are becoming increasingly apparent which will enable international nuclear cooperation projects.

There are therefore prospects to revive the 2015 nuclear deal the US pulled out of under former President Donald Trump, further blurring the near-term outlook for supply risk. As for the Russia risk, the real-time gauge of Russia supply risks suggests that this risk premium is receding. Instead.

Price action is more consistent with a disruption from the Texas Freeze, which is having an outsized impact amid low inventories and spare capacity. As weather disruptions ease, energy prices will again be increasingly vulnerable to de-escalation in supply risk.

The price of oil is receding from the multiyear tops and a correction into a deeper area of what might be regarded as a support target could be on the cards. This falls in at the confluence area between the prior daily highs and at the 50% mean reversion mark around $88.80.