Oil prices traded lower this morning after Friday's rally, dropping at one point by 0.9% to $92.99/bbl, while WTI shed 1.05% to $91.28/bbl before reversing higher.
On Friday, both benchmark crudes rallied by nearly 4% as WTI, broke out of the of $90/bbl resistance level, hitting an intraday high of $94.94/bbl, while Brent touched $96.16/bbl, a 7-year high. The key driver was geopolitical risks and unfounded fears that in the event of an escalation of the conflict with Ukraine, the US and the EU could impose sanctions on Russian hydrocarbons (although this would be suicidal for the EU). However, there was no escalation, and oil prices swung sharply in the opposite direction. In addition, investors of risk-sensitive assets are jittery about today's Fed meeting under expedited procedures, as sharp monetary policy tightening stateside could lead to a decline in risk assets and capital flight to the dollar. Despite the correction, oil prices still remain slightly below $95/bbl per barrel, and the IEA warns that hydrocarbon prices will not likely go down before Q3 2022.
On the downside, if Brent slides below $92/bbl, it could correct to $88-89/bbl. Today, Brent prices might drop as low as $92/bbl.