What’s Affecting Oil Prices This Week? (May 16, 2022)

The price of Brent crude ended the week at $111.33 after closing the previous week at $112.36. The price of WTI ended the week at $110.49 after closing the previous week at $109.77. The price movement aligned with our expectations that oil prices would move sideways if the EU did not reach an agreement to ban imports of Russian oil without a completed breakdown in the negotiations.

Since February 25, the price of Brent crude (and WTI) has been going through cycles of lower highs before the price retreats to the lower support level. The question remains—when will the price of oil break out of this pattern and which way will it break—below the lower support level or upwards to new highs?

The current supply situation is neutral for oil prices with the additional withdrawals from the Strategic Petroleum Reserve (SPR), relatively moderate declines in Russian supply coupled with some other OPEC+ members underproducing. We are holding to our view from March that Russian exports of crude oil will decline by a net 1.5 million bbl/d once Europe institutes a formal ban with a portion of the lost volumes to Europe being offset by increased exports to Asia and other markets.