The black liquid is bullish in the London session today, as prices bounced back and recovers some of the previous day’s losses, as growing tension in Eastern Europe and the Middle East fueled investors’ concerns over possible supply disruptions.
The global benchmark, the Brent crude futures is up 0.7%, currently trading $86.88 a barrel, after touching a session high of $87.27 a barrel earlier, reversing a 1.8% fall in the previous session. The United States’ benchmark, the West Texas Intermediate (WTI) crude futures is up 0.5%, currently trading $83.75 a barrel, after falling 2.2% on Monday.
Oil prices reached seven-year highs last week, bolstered by tight worldwide supply and resurgent global demand.
What you should know
- NATO stated on Monday it was putting forces on standby and reinforcing eastern Europe with more ships and fighter jets, in what Russia denounced as Western “hysteria” in response to its build-up of troops on the Ukraine border.
- In the Middle East, Yemen’s Houthi movement, aligned with Iran, launched a missile attack at the United Arab Emirates on Monday that targeted a base hosting the U.S. military, but U.S. and Emirati officials stated it was thwarted by U.S.-built Patriot interceptors.
- The Organization of Petroleum Exporting Counties and its allies, a group going by the acronym, OPEC+, is 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 includes Nigeria and Libya.
- Lower U.S. oil inventories are also providing support, with crude inventories around the NYMEX WTI delivery point at Cushing in Oklahoma at the lowest for the time of year since 2012.
What they are saying about the oil market
Chiyoki Chen, chief analyst at Sunward Trading stated, “The market tone stays strong, supported by heightening geopolitical risk. We see profit-taking when the prices move higher, but buying appetite for oil remains solid as investors are worried about supply disruptions in the event of a Russia-Ukraine conflict.”
Satoru Yoshida, a commodity analyst with Rakuten Securities stated, “Downside risk on the oil market will be limited as any escalations of the situation in Ukraine or the Middle East will cause the prices to skyrocket. Also, supply tightness is expected to continue as OPEC+ is struggling to reach its output target and will likely keep its policy of gradual increase of supply.”
Portfolio investors added to their bullish positions in oil for the fifth week running, as the worst of the latest wave of coronavirus infections passed and governments began to lift restrictions on business and travel, driving the demand for the black liquid.