The black liquid is bullish in the Asian session today on supply disruption worries, amid rising tensions in Eastern Europe and the Middle East, which could make an already tight market even tighter, while Organization of Petroleum Exporting Countries and its allies (OPEC+) continue to struggle to raise output.
The global benchmark, the Brent crude futures is up 0.9%, currently trading $88.70 a barrel, reversing a 0.6% loss on Friday. The United States’ benchmark, the West Texas Intermediate (WTI) crude futures is up 0.9%, currently trading $85.86 a barrel, having fallen 0.5% on Friday, as of the time of this writing.
Both benchmarks rose for a fifth week in a row last week, gaining around 2% to hit their highest since October 2014, a price point not seen since ex-President Goodluck Johnathan was in office. Prices are already up more than 10% this year on the concerns over tightening supplies.
What you should know
- Fueling fears of supply disruption in Eastern Europe, the United States on Sunday ordered the departure of family members of staff at its embassy in Ukraine, citing the continuing threat of military action from Russia.
- The New York Times reported on Sunday that U.S. President Joe Biden was considering deploying several thousand U.S. troops to NATO allies in Eastern Europe and the Baltics.
- A senior British government minister said on Sunday that Russia will face severe economic sanctions if it installs a puppet regime in Ukraine. This statement comes after Great Britain accused the Kremlin of seeking to place a pro-Russian leader in power in the region.
- In the Middle East, the United Arab Emirates’ defense ministry said it destroyed two Houthi ballistic missiles targeting the Gulf country on Monday, with no casualties, the state news agency (WAM) reported.
- Other factors affecting the price of oil is the OPEC+, struggling to hit its monthly output increase target of 400,000 barrels per day (bpd). OPEC+’s compliance with long-installed oil production cuts rose to about 122% in December, two sources from the producer group told Reuters, indicating that some members continue to struggle to raise their output. Members that fall in this category include Nigeria and Libya.
Kazuhiko Saito, chief analyst at Fujitomi Securities stated, “Investors remained bullish due to geopolitical risk between Russia and Ukraine as well as in the Middle East, while OPEC+ continued to fail to reach its output target. An expectation for higher heating oil demand in the United States amid cold weather also added to pressure.”
Tetsu Emori, CEO of Emori Fund Management Inc stated, “Expectations that OPEC+ members such as Saudi Arabia and Russia are likely to keep the current policy of gradual increase of output to maintain Brent oil prices between $85 and $90 a barrel is providing support to an overall sentiment.”
Bottomline
Money managers raised their net long U.S. crude futures and options positions in the week to Jan. 18, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday.
In the United States, petroleum inventories have continued to slide over the last month, while energy firms cut oil rigs this week for the first time in 13 weeks. Analysts expect cold weather to boost heating demand over the next few weeks, pushing the sentiment that a $100 per barrel for oil is a matter of when and not if.
