WTI conslidates from fresh lows in a daily cycle of supply

US oil under pressure below $100bbls spot.

The supply of oil is kicking in and weighing the price into fresh lows for the week.

Supply is back with yesterday's announcement of the release of 60-million barrels of strategic reserves from members of the International Energy Agency. Also, a drop in Chinese demand as it quarantines the commercial centre of Shanghai to check the spread of a Covid-19 outbreak is weighing on prices. When coupled with higher US oil inventories, it has made for a bearish recipe.

Meanwhile, analysts at TD Securities explained that the physical oil markets are showing signs of softening amid dual blows from significant Chinese lockdowns and a massive SPR release, but energy supply risks will likely remain elevated nonetheless.

''After all, while our tracking of Chinese mobility had indicated a 10% slump in road traffic, we now see a sign of stabilization in Chinese mobility according to a weighted average of congestion indicators for the 15 largest cities by vehicle registrations.''

''However,'' the analysts added, ''changes in Chinese demand pale in comparison to the persistent underproduction from OPEC+, with spare capacity split between a few 'Haves' and a larger contingent of 'Have-Nots'.''

Ukraine crisis risks

Sanctioning has been a theme in the markets this week as the EU and US announced the proposed plans that include a ban on imports of Russian coal by the EU while the US plans to ban all new investment in Russia. European Council President Charles Michel told the European Parliament Wednesday that “measures on oil and even gas will also be needed sooner or later,” as he condemned reports of atrocities by Russian forces in Ukraine.

''Further, self-sanctioning continues to have a significant impact on Russian oil exports as highlighted by their flagship Urals crude trading at a record discount. And yet, the right tail remains fat in energy markets as the European Commission continues to debate on how to tackle Russian oil,'' analysts at TD Securities explained.

''The war in Ukraine is further driving up the cost of trading energy products across the world, creating additional frictions for commodity traders and thereby providing an additional channel for energy supply risks to rise.''