WTI surges back towards Monday’s multi-year highs with Biden expected to announce Russia energy import ban

• Oil has rocketed higher in recent trade in anticipation that Biden will announce a complete ban on Russian energy imports.
• WTI at one point surged as high as $126.00 again but has since backed off to the mid-$124.00s.

Crude oil prices have rocketed higher in recent trade in anticipation that US President Joe Biden will announce a complete ban on Russian energy imports (oil, liquid natural gas and coal) in an upcoming speech at 1545GMT. Front-month WTI futures rallied from the $122.00 area as recently as 1300GMT to as high as $126.00 by 1340GMT. Since then, prices have backed off a little. At current levels in the mid-$124.00s, WTI is trading with on-the-day gains of about $4.50 and is eyeing a test of resistance in the form of Monday’s $127.50 highs (WTI’s highest levels since 2008 at the time).

The most recent spurt higher takes WTI’s gains since the start of the month to just shy of $30, putting America’s main crude oil benchmark on course for its best percentage MoM gain since May 2020 and for its largest USD gain ever. Some traders have warned that Biden’s announcement of a Russia oil ban may be greeted with a “sell the fact” reaction – i.e. profit-taking that could see some of the recent intra-day gains unwound.

But broadly speaking, fundamentals remain very much bullish for crude oil markets. In 2021, the US imported an average of 700K barrels per day from Russia, so the country will somehow need to make up the shortfall. Meanwhile, though Europe is currently divided over whether to follow suit with a Russian energy import ban, a move by the Americans to go ahead with a ban without them piles pressure onto reluctant nations like Germany and Italy.

Goldman Sachs recently upped its forecast for Brent crude in 2022 to $135/barrel (from $98 previously) and in 2023 to $115/barrel (from $105 previously). The bank explained that the world economy could face one of the “largest energy supply shocks ever” given Russia's key role as a producer and global exporter. With US/Iran negotiations have reportedly recently run into a snag amid new demands from Russia, one source of much-hoped-for crude oil supply appears less likely to be coming back any time soon.

The US is currently trying to schmooze an old foe in the form of the ruling Venezuelan regime in an attempt to find new sources of oil supply, and talks with Nicolas Maduro's government were reportedly amicable and useful on Tuesday. But any large ramping up of Venezuelan output will take some time. As supply concerns rage, concerns about dwindling oil reserves will also be in focus. In that context, the weekly update from API as to the state of private US inventories will be eyed at 2130GMT.