WTI crude oil continued to extend losses on Wednesday to trade at just below $96.50. Any news suggesting a potential new supply disruption could easily move WTI prices back into the $120s or higher again, strategists at TD Securities report.

Deficit risks remain

“Russian oil output may drop by a quarter next month and stay there, or perhaps drop further in the coming months. Similarly, Saudi Arabia and the UAE are not promising more crude oil despite UK prime minister's trip to petition for supply increases.”

“Any unanticipated supply interruption could easily see prices surge back to recent highs above $120/b, as the market prices H2-2022 deficits with little inventories to fill the shortfalls.”

“There is limited ability to replace or fully redirect Russian crude in the near-term, and in the medium term too due to geography and lack of infrastructure to bring supply to markets which are willing to take that crude.”