Oil Rallies With Focus on Stockpile Draw, Ukraine

Wider markets also rallied on Wednesday, as this week’s selloff started to ease.

Crude is having a volatile week, retreating Monday then rebounding Tuesday. Prices remain close to a seven-year high with demand continuing to recover from the pandemic as mobility picks up. A string of Wall Street banks including Goldman Sachs Group Inc. have forecast oil will hit $100 a barrel this year as the global market tightens.

“The market has basically been in persistent undersupply since mid-2020, thanks to OPEC+ cuts and a continued oil demand recovery,” said Helge Andre Martinsen, a senior oil analyst at DNB ASA. “We fully acknowledge that the world is not running out of oil resources, but we might enter an oil-market squeeze triggered by too little investment and oil demand rebounding quickly.”

Prices have also reacted to mounting concern over a possible Russian incursion into Ukraine, with U.S. President Joe Biden saying he’d consider sanctioning Vladimir Putin if the Russian leader orders an invasion. However, while a potential conflict carries large risks for financial markets — especially energy commodities such as gas and oil — Goldman Sachs’s base case is for no disruption to supplies.

Also in focus Wednesday is the Federal Reserve’s first policy-setting meeting of the year. Officials are expected to reaffirm their commitment to containing roaring inflation by ending stimulus and raising interest rates over 2022.