Tokyo, Jan. 31 (BNA): Oil rose more than 1% on Monday to approach 7-year highs hit in the previous session, while supply concerns and political tensions in Eastern Europe and the Middle East put prices on track for their biggest monthly. Gains in nearly a year.
Brent crude rose $1.07, or 1.2 percent, to $91.10 a barrel at 0325 GMT, after adding 69 cents on Friday. Reuters reported that the contract for the first month for delivery in March expires later in the day.
The most active Brent contract, for April delivery, was trading at $89.51, up 99 cents, or 1.1%.
US West Texas Intermediate crude rose $1.07, or 1.2 percent, to $87.89 a barrel, after rising 21 cents on Friday.
Benchmarks hit their highest levels since October 2014 on Friday, $91.70 and $88.84, respectively, the sixth consecutive weekly gain. They were heading for a gain of about 17% this month, the most since February 2021.
“The underlying concern about global supply shortages, along with ongoing geopolitical risks, prompted the market to start the week on a strong note,” said Toshitaka Tazawa, an analyst at Fujitomi Securities Co., Ltd.
“With OPEC+ expected to maintain the current policy of gradually increasing production, oil prices are likely to remain on an upward trend this week,” he said, predicting Brent crude to remain above $90 and WTI heading towards $90.
The major producers in the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, collectively known as OPEC+, have raised their production target each month since August by 400,000 barrels per day while scrapping record production cuts made in 2020.
But they failed to achieve their productivity goals as some members struggled with capacity constraints.
Several sources in OPEC + told Reuters that at its meeting on February 2, OPEC + is likely to adhere to the scheduled increase in oil production target for the month of March. Read more
Reuters columnist John Kemp said oil prices are showing signs of overheating as traders anticipate a severe oil shortage this year, noting that inventories are already low and there is little global spare capacity to ramp up production in the short term.
According to ANZ research, with market deficits and low inventories, “supply constraints are likely to result in a significant risk premium” as travel increases.
“Traffic in Europe rebounds with lower Omicron case numbers. In the US, gasoline demand is only 4% below 2019 levels, a better result than expected in November,” it said in a note.
Tensions between Russia and the West have also boosted crude oil prices. Russia, the world’s second largest oil producer, has been at loggerheads with the West over Ukraine, raising fears that energy supplies to Europe could be disrupted.
The head of NATO said on Sunday that Europe needs to diversify its energy supplies as Britain warned that it was “highly likely” that Russia was looking to invade Ukraine.
The market is on alert about the situation in the Middle East as well after the United Arab Emirates said it had intercepted a ballistic missile fired by Yemen’s Houthis while the Gulf country hosted Israeli President Isaac Herzog in a first-of-its-kind visit.
Meanwhile, more than 1,400 US flights were canceled on Sunday after the northeastern US states were inundated the day before by a deadly winter storm that prompted several states to declare states of emergency.
MI