Oil climbs on supply concerns, limited Omicron impact

Crude oil storage tanks are seen in an aerial photo at the Cushing oil hub in Cushing, Oklahoma, USA on April 21, 2020. REUTERS / Drone Base / File Photo

SINGAPORE, January 17 (Reuters) – Oil prices rose on Monday, with Brent futures peaking at more than three years, as investors expect supply to remain tight amid limited production from large global demand producers unaffected by Omicron the coronavirus variant.

Brent oil futures increased 40 cents, or 0.5%, to $ 86.46 per barrel by 0641 GMT. Earlier in the session, the contract reached its highest since October 3, 2018 at $ 86.71.

US West Texas Intermediate oil rose 58 cents, or 0.7%, to $ 84.40 a barrel, reaching $ 84.78, the highest since November 10, 2021, earlier in the session.

The rise followed a rally last week when Brent rose more than 5% and WTI climbed over 6%.

French oil purchases, driven by supply disruptions and signs that the Omicron variant will not be as disruptive as feared for fuel demand, have pushed some crude oil grades to several-year highs, suggesting that the rise in Brent futures may be sustained for a while longer, traders said. . . read more

“The bullish sentiment continues as (producer group) OPEC + does not provide enough supply to meet strong global demand,” said Toshitaka Tazawa, analyst at Fujitomi Securities Co. Ltd.

“If (investment) funds increase the allocation weight for crude oil, prices could reach their heights in 2014,” he said.

The Organization of Petroleum Exporting Countries, Russia and its allies, collectively known as OPEC +, are gradually relieving production cuts implemented as demand collapsed in 2020.

However, many smaller manufacturers cannot increase the supply, and others have been wary of pumping too much oil in the event of renewed setbacks in COVID-19. read more

“What emerges next is this summer’s demand bump, especially in Europe and the US, which could be greater than last year’s, if the growing hope around Omicron that finally turns COVID from pandemic to endemic proves correct,” said Vandana Hari, energy. analyst at Vanda Insights.

Persistent geopolitical threats to supply also support bullish sentiment, Hari said.

US officials on Friday expressed fears that Russia was preparing to attack Ukraine if diplomacy failed. Russia, which has gathered 100,000 troops at Ukraine’s border, posted pictures of its forces on the move. read more

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

US crude oil inventories, meanwhile, fell more than expected to their lowest level since October 2018, but fuel inventories increased due to weak demand, the Energy Information Administration said on Wednesday. read more

Concerns about supply constraints outweighed the news about China’s possible oil spills from reserves, Fujitomi analyst Tazawa said.

Sources told Reuters that China plans to release oil reserves around the Lunar New Year holiday between January 31 and February 6 as part of a plan coordinated by the United States with other major consumers to reduce global prices. read more

Reporting by Yuka Obayashi in Tokyo and Roslan Khasawneh in Singapore; Edited by Kenneth Maxwell and Himani Sarkar

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