Crude oil markets continue to sell off, with the prospects of a Russia-Ukraine deal further sapping energy supply risk premia over the last sessions, TDS' Senior Commodity Strategist Daniel Ghali notes.

Crude oil markets continue to sell off

"Our gauge of energy supply risk has now completely reversed its previous rise associated with Biden's farewell sanctions on Russia, but our read suggests that concerns surrounding OPEC+ spare capacity and expectations of a surplus are trumping the geopolitical effects thus far."

"We only see a very narrow path for significantly higher oil prices to remain sustainable, but most paths point to a broadly range-bound context for oil prices this year. For the time being, CTA selling activity in Brent crude is exacerbating the recent decline, with algos set to sell up to -20% of their max size this session."

"Unfortunately for the bulls, while nascent signs of algo selling exhaustion are emerging on the horizon, we're not quite there yet — our simulations still point to scenarios that can lead to further selling activity from this cohort."