Oil rises at geopolitical risk, supply shortage

Oil pump jacks are seen at Vaca Muerta shale oil and gas deposits in the Patagonian province of Neuquen, Argentina, January 21, 2019. REUTERS / Agustin Marcarian / File Photo

LONDON, January 31 (Reuters) – Oil rose on Monday as supplies shortages and political tensions in Eastern Europe and the Middle East put prices on track for their biggest monthly increase in almost a year.

Brent oil had risen 66 cents, or 0.7%, to $ 90.69 a barrel by 1005 GMT. The front-month contract for delivery in March expires later in the day. The most active Brent contract, for delivery in April, traded at $ 88.98, up 46 cents, or 0.5%.

US West Texas Intermediate oil rose 51 cents, or 0.6%, to $ 87.33 a barrel.

The benchmark indices recorded their highest levels since October 2014 on Friday, $ 91.70 and $ 88.84, respectively, and their sixth weekly gain in a row. They were heading for about a 17% rise this month, the largest since February 2021.

“Today, it is above all the concerns about supply shortages in connection with the Ukraine crisis that continue to push prices even further up,” said Commerzbank’s commodities analyst Carsten Fritsch.

The NATO chief said on Sunday that Europe needed to diversify its energy supply, as Britain warned that it was “very likely” that Russia was looking to invade Ukraine. read more

UBS analyst Giovanni Staunovo said “ongoing geopolitical tensions, several European countries planning to lift Covid-related restrictions and renewed supply disruptions in Ecuador, support oil prices at the beginning of the week.”

OCP Ecuador, the operator of the country’s privately owned heavy oil pipeline, stopped pumping crude oil on Saturday as a precautionary measure after it burst in the Amazon, and began cleaning and repairing. read more

The market is also on guard over the Middle East situation after the United Arab Emirates said it had intercepted a ballistic missile fired by Yemen’s Houthi when the Gulf state hosted Israeli President Isaac Herzog on a first such visit. read more

For oil prices, there will probably be a bullish sentiment this week, analysts said, with an expectation that OPEC + will stick to its existing policy of gradual production increases.

Major producers in the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, collectively known as OPEC +, have raised their production targets every month since August by 400,000 barrels per day (bpd).

At its meeting on February 2, OPEC + is likely to stick to a planned increase in the oil production target for March, several OPEC + sources told Reuters. read more

Reporting by Bozorgmehr Sharafedin in London, additional reporting by Yuka Obayashi and Mohi Narayan in Tokyo; Edited by Himani Sarkar, Kirsten Donovan

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