WTI Crude Oil Price Analysis: Output Halts in Norway and Kazakhstan Tighten Supply by 28%

Oil prices rose on Tuesday, adding to Monday’s $2 a barrel gain, as two major production sites were hit by disruptions.

Norway’s Johan Sverdrup oilfield, the largest in Western Europe with 755,000 barrels a day capacity, has stopped producing after an onshore power outage. Equinor, the operator, is working to get it back online but no timeline has been given.

At the same time Kazakhstan’s Tengiz oilfield, operated by Chevron, has cut output by 28-30% for repairs. The energy ministry expects repairs to be completed by Saturday which has further squeezed global oil supplies.

“These outages have tightened supply when the market was already nervous about geopolitical risks,” said ING analysts.

Geopolitical Tensions Heighten Market Volatility

The market is still nervous as geopolitical risks escalate. Over the weekend the US administration gave Ukraine permission to launch long range missile strikes on Russian targets using US supplied weapons. Russia responded with its largest airstrike on Ukraine in three months, damaging critical infrastructure.

The Kremlin condemned the US decision and warned of higher risks of conflict with NATO.

Toshitaka Tazawa, analyst at Fujitomi Securities, said “Investors are watching how the Russia-Ukraine situation unfolds especially after this weekend.” The uncertainty has boosted demand for safe haven assets like oil.

Market Dynamics: Contango Signals Supply Easing

While short term supply disruptions are pushing prices up, broader market dynamics are pointing to supply easing. For the first time since February WTI crude futures are in contango, with Jan contracts trading above Dec.

This means immediate supply pressures are easing even as production halts and geopolitical risks dominate the headlines.

WTI crude is trading at $68.95, testing $69.34. Technicals are bearish, RSI is 51.79 and 50 day EMA is $68.62. If it fails to break above $69.34 it could go down to $68.37 or $67.71, if it breaks above it could go to $70.73.

Key Points at a Glance:

• Johan Sverdrup oilfield halts production, tightening supplies.
• Tengiz oilfield output drops 28-30% due to repairs.
• WTI crude trades near $68.95; key resistance at $69.34.
• Geopolitical tensions escalate after U.S. arms Ukraine for long-range strikes.
• Contango in WTI futures indicates potential easing of supply constraints.