Oil prices rose on Monday amid the limited impact of the Omicron coronavirus variant on global demand and expectations that supply will remain tight with production from major producers.
Brent crude futures rose 9 cents, or 0.1%, to $86.15 a barrel as of 0539 GMT. Earlier in the session, the contract reached $86.71, its highest level since October 3, 2018.
West Texas Intermediate (WTI) crude was up 29 cents, or 0.4%, to $84.11 a barrel after hitting $84.78 earlier in the session, the highest since November 10, 2021.
The gains follow a rally last week, with Brent gaining more than 5% and WTI gaining over 6%.
Traders are predicting that frantic oil uptake, driven by supply disruptions and signs that the Omicron variant will not be as devastating to fuel demand as feared, has pushed oil to multi-year highs and the rally in Brent futures may continue for a while.
The perceptible rise continues as producer group OPEC+ does not provide sufficient supply to meet strong global demand.
The Organization of the Petroleum Exporting Countries, Russia, and its allies are gradually easing production cuts that were imposed when demand collapsed in 2020. However, a noticeable rise continues as the producer group does not provide sufficient supply to meet strong global demand.
But besides that, many small producers are technically unable to increase supply, while others are wary of pumping too much oil in the event of possible COVID-19 disruptions.
If the growing hope that Omicron will eventually turn COVID-19 from pandemic to endemic prove to be true, summer demand growth could be greater than last year, especially in Europe and the US.
Geopolitical threats with supply also bolster the bullish sentiment. Fears persist that Russia is preparing to attack Ukraine if diplomacy fails.
Discussions are underway on contingency plans in case the conflict between Russia and Ukraine could disrupt Russia’s supply of natural gas supplies to Europe.
U.S. crude inventories have fallen more than expected since October 2018, but gasoline stockpiles have increased due to weak demand, the Energy Information Administration (EIA) said on Wednesday.
Regarding supply restrictions, the possible release of oil from China’s reserves is in the limelight. China has agreed with the United States to release its oil reserves.
Sources say China plans to release oil reserves during the Lunar New Year holidays between January 31 and February 6, as part of a plan the US is coordinating with other major consumers to lower global prices.