WTI Holds Support Around $84.00 AS Physical Market Builds

Amid holiday-thinned trading conditions with US markets shut for MLK Day, oil prices have been broadly stable on the first trading session of the week, with front-month WTI futures subdued near $84.00 per barrel.

Prices hit a fresh two-month high in the $84.70s early on during Asia Pacific trade, but profit-taking ahead of the 2021 highs (in the $84.90-$85.50 area) had pushed WTI back to the mid-$83.00s by midway through European trade.

Prices have since recovered to near-bang on $84.00, where they trade lower by a very modest 30 cents or so on the day, up near $9.0 (or close to 12%) on the year so far.

Negative developments such as news of an upcoming coordinated crude oil reserve release by China and the US as well as a recovery back to normal output levels in Libya hasn’t been able to substantially hurt prices on Monday.

Regarding the former; sources told Reuters last Friday that China will release reserves in conjunction with the US between January 31 and February 6, after agreeing to a coordinated release with the US in late 2021. In terms of the output recovery in Libya; production is back to 1.2M barrels per day, and near late-2021 levels of around 1.3M BPD, from as low as 700K BPD as recently as two weeks ago.

Focus has instead been on tightness in the physical crude oil market. Various grades of physical crude oil are currently trading at multi-year highs, which analysts at Reuters say suggests a tight market that will push the futures rally on.

Smaller producers like Libya within OPEC+ have struggled to keep up with the cartel’s output quota hikes in recent months. “Bullish sentiment in oil markets is continuing as OPEC+ is not providing enough supply to meet strong global demand.

The US Energy Information Agency said last week that crude oil stocks fell to their lowest since October 2018, after data confirmed stocks falling for a seventh consecutive week.