Lagos — After such a sleepy period from October to December, the crude market has come alive, with the buyers now in firm control of the tape, with Brent futures pushing through the 200-day moving average, and Friday’s highs, with many now questioning if it can squeeze into $85.
Supply is the key near-term driver, with Biden’s fresh sanctions on Russia’s two main oil producers and Russian tankers, further complicating the logistical challenges Russia now faces. Biden has packaged this as offering Ukraine increased leverage for when Trump looks to broker peace talks, but there is no doubt the further rise in crude will not sit well with Trump’s grand plans to dramatically lower energy prices.
With the cold snap already adding momentum to the buying in crude, married with the recent draw in inventories, the would-be sellers have simply moved aside, a factor in the order books which has resulted in the buyers moving price higher with increasing ease. The fact that we’re seeing both the Brent and WTI futures curve moving deeper into backwardation is also a key development, as those holding long positions are further incentivised to hold for the increased carry that is on offer.
Where to from here? With supply the main near-term driver we continue to watch for headlines on sanctions and how Russia plans to counter the effects. For now, it’s not a move I would stand in the way of, and higher levels in crude seem probable.
