Oil prolongs supply tightening rally, with Brent at an altitude of more than 3 years

Author: Yuka Obayashi

TOKYO (Reuters) – Oil prices rose on Monday as futures for more than three years peaked as investors continued to tighten supply amid reduced production by large producers without disrupting global demand for Omicron coronavirus variants.

Crude Brent futures gained 42 cents, or 0.5%, to $ 86.48 a barrel for 0022 GMT. The contract hit its highest since October 3, 2018 – $ 86.71 – at the start of the session.

US West Texas Intermediate crude rose 62 cents, or 0.7%, to $ 84.44 a barrel after hitting $ 84.78, the highest since November 10, 2021, at the start of the session.

Profit rose last week, with Brent up 5.4% and WTI up 6.3%.

Enthusiastic oil purchases, fueled by supply disruptions and signals that the Omicron variant will not be as disruptive as fuel demand, have pushed crude ratings to multi-year highs, suggesting that Brent could hold the future rally a little longer, traders said. he said.

“There is still a strong feeling that (the producer group) OPEC + is not providing enough supplies to meet strong global demand,” said Toshitaka Tazawa, an analyst at Fujitomi Securities Co Ltd.

“If the investment funds increase the gross allocation weight, prices could reach a 2014 high,” he said.

The Organization of the Petroleum Exporting Countries (OPEC) and its allies – OPEC + – are gradually easing production cuts imposed by 2020 when demand fell.

But many smaller producers are unable to increase supply and others have been wary of pumping too much oil in the event of new COVID-19 setbacks.

Concerns about a Russian attack that could disrupt energy supplies also helped prices.

U.S. officials have expressed concern that Russia is preparing to attack Ukraine on Friday if diplomacy fails. Russia, which has gathered 100,000 troops on the Ukrainian border, has released photos of its forces on the move.

The U.S. government has held talks with several international energy companies on contingency plans to supply Europe if the conflict between Russia and Ukraine disrupts Russian supply, two U.S. officials and two industry sources told Reuters on Friday.

oilfields, on the other hand, have fallen more than expected since October 2018, but gasoline inventories have risen due to weak demand, the Energy Information Administration said on Wednesday.

Concerns about supply cuts have overwhelmed China’s ability to extract oil from reserves, Fujitomi analyst Tazawa said.

Sources told Reuters that China plans to release its oil reserves around the New Year holidays from January 31 to February 6 as part of a U.S.-coordinated plan to reduce global prices.