Oil rises amid concerns over tight supplies

Published On: January 28, 2022Categories: Alternative Investments1.6 min read

Brent crude futures jumped 45 cents, or 0.5%, to $89.79 a barrel and U.S. WTI crude futures gained 50 cents, or 0.6%, to $87.11 a barrel

Oil prices rose on Friday, set for their sixth weekly gain, amid concerns of tight supplies as major producers continue their policy of limited output increases amid rising fuel demand.

Brent crude futures jumped 45 cents, or 0.5%, to $89.79 a barrel at 0429 GMT, after dropping 62 cents during the previous day. However, prices did reach $91.04 earlier in that session, the highest since October 2014.

U.S. West Texas Intermediate (WTI) crude futures gained 50 cents, or 0.6%, to $87.11 a barrel, having dropped 74 cents on Thursday. WTI also reached a seven-year high of $88.54 earlier in the session.

Both Brent and WTI are set to rise for a sixth week, the longest weekly streak since October, when Brent prices jumped for seven weeks while WTI gained for nine.

This year, prices have gained nearly 15% amid geopolitical tensions between Russia, the world’s second-largest oil producer and a key natural gas provider to Europe, and the West over Ukraine as well as threats to the United Arab Emirates from Yemen’s Houthi movement that have raised concerns about energy supply.

Where Brent crosses $90 level, we see some selling from a sense of accomplishment, but investors start buying again when the prices fall a little as they remain cautious about possible supply disruptions due to rising geopolitical tensions, said Tatsufumi Okoshi, senior economist at Nomura Securities.

The market expects supply will stay tight as the OPEC+ is seen to keep the existing policy of gradual increase in production, he said.

The market is focusing on a Feb. 2 meeting of the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, a group known as OPEC+.

OPEC+ is likely to stick with a planned rise in its oil output target for March, several sources in the group told Reuters.

An increase in oil output by producer nations cashing in on expensive crude has depleted the cushion of spare capacity that protects the market from sudden shocks and raised the risk of price spikes or even fuel shortages.

About the Author: Jonathan Adams

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