Oil prices went up and surpassed $90 per barrel this Wednesday for the first time since 2014, supported by tight supplies and rising political tensions between Russia and Ukraine. Also, over concerns that an invasion would produce physical disruptions on the market.
Firstly, Russia deployed thousands of troops on Ukraine’s border this week, causing fears of an invasion. According to Reuters, US Secretary of State Tony Blinken said the United States will make sure global energy supplies are not interrupted if Russia takes action.
Moreover, Paul Sheldon, chief geopolitical advisor, analytics, at S&P Global Platts, said about the matter. “Markets are nervous that physical supply could be disrupted. Most likely, flows will continue, but the risks are not negligible that something could affect physical balances.”
In addition, yesterday, President Joe Biden said he would consider personal sanctions on President Vladimir Putin if Russia invades Ukraine.
As a result of the tense situation, Brent crude gained $1.76, 2%, to settle at $89.96 a barrel, after surpassing $90 for the first time since October 2014. The US mix, the West Texas Intermediate (WTI) crude closed up $1.75, or 2%, to $87.35 a barrel.
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Oil inventories in the US rising
Later in the session, in post-settlement trading, oil prices edged off their gains retreating with other risk assets like equities. This happened after US Federal Reserve Chairman Jerome Powell’s said that he expected interest rates to hike.
Furthermore, upon these factors, there is a tight supply on the market. As Reuters reports, OPEC+ is having trouble meeting monthly production targets; especially as it restores supply to markets after drastic cuts in 2020. Also, the United States is more than a million barrels short of its record level of daily output.
Claudio Galimberti, senior vice president of analysis at Rystad, said about the matter. “The only organization that can change the course of prices now is OPEC.” Meanwhile, demand remains strong, suggesting inventories may decline further. Additionally, OPEC+ meets on Feb. 2 to consider another output increase.
Finally, the oil inventories in the US rose in the latest week, with crude stocks up by 2.4 million barrels, against expectations for a modest decline. Gasoline inventories rose to their highest in almost a year – a needed salve for the market.
