The market remains strong, bolstered by rising geopolitical risks. Oil rebounded on Tuesday, reversing some of the previous day’s losses as escalating geopolitical tensions raised concerns about potential supply disruptions.
Prices hit a seven-year high last week, supported by tight worldwide supply and resurgent global demand.
Brent crude futures rose 61 cents, or 0.7%, to $86.88 a barrel at 0722 GMT after touching in early hours at session high of $87.27 a barrel, reversing a 1.8% fall in the previous session.
West Texas Intermediate (WTI) crude futures which were down 2.2% on Monday, rose 44 cents, or 0.5%, to $83.75 a barrel.
The buying appetite for oil remains solid as investors worry about supply disruptions in the event of a Russia-Ukraine conflict.
NATO is sending ships and warplanes to Eastern Europe. In response to the Russian massing of troops on the Ukrainian border, the West is fortifying Eastern Europe with more ships and warplanes.
In Yemen, the Houthis failed in their second missile attack on the UAE. US and UAE officials said in the Middle East, Yemen’s Iran-aligned Houthi movement carried out a missile strike Monday targeting a base in the United Arab Emirates that houses the US military. The attack was thwarted by U.S.-built Patriot missiles.
The downside risk in the oil market is expected to remain limited as any escalation of the situation in Ukraine or the Middle East will cause prices to skyrocket.
Also, OPEC+ is struggling to meet its target of gradual increase in supply, 400,000 barrels per day (bpd) monthly production growth, and supply tightness is expected to continue.
Falling US oil inventories are also providing support to the supply tightness. The crude inventories at the NYMEX WTI delivery point in Cushing, Oklahoma, the lowest level since 2012.
Portfolio investors increased their positions in oil for the fifth week as the worst of the last wave of coronavirus infections passed and governments began to lift restrictions on business and travel.