Adding to the worrisome geopolitical issues in Russia and the United Arab Emirates, an interruption in a pipeline from Iraq to Turkey raised concerns over the already tight supply outlook, with Brent and WTI gaining more than $1 on Wednesday.
Brent crude futures rose 87 cents, or 1%, to $88.38 a barrel at 0543 GMT, gaining 1.2% in the previous session. Brent rose to $89.05, its highest level since October 13, 2014.
Adding 1.9% gains on Tuesday, West Texas Intermediate (WTI) crude futures rose $1.03, or 1.2%, to $86.46 a barrel. WTI previously hit $87.08, its highest level since October 9, 2014.
Turkey’s state pipeline operator said that after an explosion in the Kirkuk-Ceyhan pipeline that cut off the flow of oil, the fire was extinguished and could be operational in a short time.
The pipeline where the explosion occurred carries crude oil from Iraq, the second largest producer of the Organization of Petroleum Exporting Countries (OPEC), to Turkey’s Ceyhan port for export. An investigation was conducted by the security forces on the possibility that the explosion was a terrorist attack or sabotage. In the research, it was determined that the explosion was caused by a toppled electric pole.
Some OPEC+ sources and analysts say $100 per barrel oil is possible in 2022, in part because demand remains much better than expected as the highly contagious Omicron coronavirus variant spreads and tight oil supply forecast strengthens.
Geopolitical unrest over the threat of attacks on Abu Dhabi on Monday by Yemen’s Houthi movement, which has worried the UAE, the world’s second-largest oil producer, and Russia’s troop build-up on its border with Ukraine, are raising supply concerns.
Geopolitical tensions are raising the possibility of supply disruptions as some allies of the OPEC+ group are already unable to meet their agreed production quotas of adding 400,000 bpd each month. In that case, it might not need much for Brent crude to reach $100 per barrel.
Meanwhile, on the demand side, global jet fuel consumption has increased with growth in international flights, with road traffic much higher than in the same period last year. Supply constraints and the continued rise in global oil demand will likely support oil prices quite well in the coming months.