• WTI has managed a bullish break after three days of consolidating around $110 and is looking to test last week’s highs.
• Traders are citing a combination of factors, including US demand, EU/Russia sanctions and OPEC+ production woes as supportive.

Oil prices broke out of a three-day consolidation pattern on Thursday, with front-month WTI futures leaping into the $114s per barrel from earlier session lows closer to $110. The more than $3.50 gain seen on Thursday is the largest move of the week yet, with WTI now eyeing a test of last earlier monthly highs in the $115s, plus the late March highs in the $116s. There wasn’t one specific catalyst/fundamental development to drive the upside. Rather, the gains really got going upon the open of the COMEX crude oil pit from 13:00 GMT, after which time its not uncommon to see a spike in volumes.

Market commentators/commodity analysts cited a combination of bullish factors as supporting prices on Thursday. Firstly, there is a lot of chatter about rising demand in the US as the peak driving season approaches (most define peak US driving season as starting with the coming Memorial Day weekend and going into September). So far, despite high prices, gasoline demand and vehicle miles traveled has remained robust.

Secondly, various EU officials have pushed back against recent pessimism being expressed by Hungarian officials about how soon a deal on an EU embargo on Russian oil imports can be reached. European Council President Charles Michel on Wednesday said he was confident a deal could be struck between the EU/Hungary prior to the upcoming EU Council Summit on 30 May. German Finance Minister Robert Habeck also said a deal could be struck in the coming days, or else Germany would look to “other instruments”.

Moreover, OPEC+ and its production woes have been in focus. Sources told Reuters on Thursday that, as expected, the group will proceed with its usual policy of lifting output quotas by 432,000 barrels per day (BPD) each month. The cartel has been unable to meet these output hike targets for months, initially owing to the struggles faced by smaller OPEC producers (mainly in Africa), but now more recently as Russian output drops due to Western sanctions following its invasion of Ukraine.

A recent Reuters report said OPEC+ missed its output target by 2.6M BPD in April, with Russia accounting for half of the miss. Production woes are only expected to have worsened in May. Finally, macro flows are also helping crude oil prices on Thursday, with gains being seen on Wall Street as traders pare back on hawkish Fed bets in wake of Wednesday’s Fed meeting minutes and Thursday’s underwhelming US GDP figures. Bulls will be confident that WTI’s pattern of printing higher highs and lower lows that has been in play over the past few weeks will continue, meaning a likely break higher towards $120 before some likely profit-taking.