Oil prices soared on Tuesday, hovering near seven-year highs last week on expectations that the limited production increase by leading oil producers and the strong recovery in fuel demand after the pandemic will keep supply conditions tight.
Brent crude reached its highest levels since 2014 at the end of January 2022 and recorded its biggest monthly gain in a year in January. Brent crude for April delivery rose 34 cents, or 0.4%, to $89.60 a barrel at 0455 GMT.
The front-month contract for March delivery ended Monday at $91.21 a barrel, up 1.3 percent.
West Texas Intermediate crude rose 32 cents, or 0.4%, to $88.47 a barrel after gaining 1.5% the previous day.
Brent and WTI hit their highest levels since October 2014 at $91.70 and $88.84, respectively, on Friday. Both benchmarks gained nearly 17% in January, their biggest monthly gain since February 2021, amid supply shortages and geopolitical tensions in Eastern Europe and the Middle East.
The market maintains a bullish tone on expectations of continued supply tightness as demand rises as fears over the spread of the Omicron coronavirus variant subside.
Not many surprises are expected from the OPEC+ meeting. Market analysts and sources express their general opinion that OPEC+ will continue its policy of gradual production increases at Wednesday’s meeting.
OPEC’s oil production in January once again fell short of the planned increase under the deal, with some producers struggling to pump more oil even as prices are high, polls show.
All eyes are on the OPEC+ decision, as well as the developments regarding the conflict between Russia and the West over Ukraine.
Tensions between Russia and the West supported crude oil prices. Russia, the world’s second-largest oil producer, and the West are at odds over Ukraine, fueling fears that energy supplies to Europe could be disrupted.
The United States and Britain are ready to impose sanctions on the Russian elite close to President Vladimir Putin if Russia enters Ukraine. The tension was also reflected in the United Nations.
If no more surprise happens rather than all these, Brent is expected to hold between $85 and $95 for a while amid concerns about supply shortages amid rising geopolitical tensions.
At a time when stocks are already tight due to the strong post-pandemic recovery, the risk of geopolitical disruption to oil supply indicates that the current price rally must continue.