Oil is rising due to lower supply and recovery after the Reuters pandemic

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© Reuters. PHOTOGRAPHY: GOI truck seen next to fuel pumps at Cepsa gas station in Cuevas del Becerro, Spain, November 29, 2021. REUTERS / Jon Nazca / File Photo

By Yuka Obayashi

TOKYO (Reuters) – Oil prices rose on Tuesday, hovering near seven-year highs reached last week, with limited increases in production by major oil producers and a solid recovery in fuel demand following the pandemic to keep supply conditions tight.

Brent crude for April delivery rose 34 cents, or 0.4%, to $ 89.60 a barrel at 4:55 a.m. GMT.

The first-month delivery contract in March expired on Monday at a price of $ 91.21 per barrel, an increase of 1.3%.

U.S. West Texas Intermediate rose 32 cents, or 0.4 percent, to $ 88.47 a barrel after rising 1.5 percent the day before.

The benchmarks reached their highest level since October 2014 at $ 91.70, or $ 88.84. They rose by about 17 percent in January, the biggest monthly increase since February 2021, amid supply shortages and geopolitical tensions in Eastern Europe and the Middle East. GRAPHIC: reached the highest level since 2014 at the end of January 2022, https://fingfx.thomsonreuters.com/gfx/ce/xmvjojlwgpr/BrentCrudeJan2022.png

“The market maintains a bullish tone due to the expectation that supply constraints will continue as demand grows, with the withdrawal of fears of spreading the Omicron coronavirus variant,” said Hiroyuki Kikukawa, chief research officer at Nissan (OTC 🙂 Securities.

“All eyes are on the OPEC + decision, as well as on the development of the conflict between Russia and the West over Ukraine,” he said.

Market analysts and Reuters sources greatly expect that OPEC +, which brings together the Organization of the Petroleum Exporting Countries and its allies led by Russia, will maintain its policy of gradually increasing production when it meets on Wednesday.

OPEC’s oil production in January was again below growth planned by an agreement with allies, a Reuters survey on Monday showed, highlighting some producers’ struggle to pump more even when prices are high.

“We expect a few surprises from the OPEC + meeting, although there is little chance that Saudi Arabia will voluntarily increase production outside OPEC to avoid falling demand caused by higher prices,” said Naohiro Niimura, partner at Market Risk Advisory and a research and consulting firm.

“If it’s not a surprise, Brent is expected to stay between $ 85 and $ 95 for some time due to concerns about supply shortages amid growing geopolitical tensions,” he said.

Tensions between Russia and the West have supported crude oil prices. Russia, the world’s second-largest oil producer, and the West are at loggerheads over Ukraine, fueling fears that Europe’s energy supplies could be disrupted. GRAPHIC: Brent Crude Oil Gets Highest Monthly Profit of the Year in January, https://fingfx.thomsonreuters.com/gfx/ce/byprjxrdnpe/BrentCurveJan2022.png

The United States and Britain are ready to punish Russian elites close to President Vladimir Putin by freezing assets and banning travel if Russia enters Ukraine, Washington and London said Monday as tensions spilled over to the United Nations.

The risk of geopolitical disruptions in oil supply at a time of already low stocks due to a strong recovery after the pandemic has led to an increase in premiums demanded by barrels for fast delivery, suggesting current price growth must continue.

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