NEW YORK (Jan 20): Oil rose modestly on Thursday, as bulls remain in charge, with benchmark Brent nearing US$90 a barrel, bolstered by strong demand and concerns about short-term supply disruptions.
Brent crude futures were up 67 cents, or 0.7%, at US$89.07 a barrel at 11.32am EST (1632 GMT) after falling more than US$1 in earlier trade. The global benchmark rose to US$89.17 on Wednesday, its highest level since October 2014.
US West Texas Intermediate (WTI) crude futures for February delivery were up 69 cents, or 0.8%, at US$87.65 a barrel. The contract, which expires on Thursday, climbed to US$87.91 on Wednesday.
The more active March WTI contract was up 72 cents to US$86.52.
Trading has been dominated by supply concerns, from short-term issues like a temporary halt to flows in an Iraq-to-Turkey pipeline to a consistent shortfall from OPEC+ members in reaching targeted supply increases.
In the meantime, demand remains steady, with US product supplied, a proxy for demand in the world’s largest consumer, reaching 21.2 million bpd over the past four weeks, ahead of the pre-pandemic pace.
“The voices of those forecasting US$100 per barrel oil are getting louder by the day,” said Tamas Varga at oil brokerage PVM.
Crude stocks rose by 515,000 barrels last week while gasoline inventories rose by 5.9 million barrels, boosting those inventories to their highest in a year, according to the US Energy Department.
Supply concerns have mounted this week after a fire temporarily halted flows through an oil pipeline running from Iraq’s Kirkuk to the Turkish port of Ceyhan on Tuesday.
An attack by Yemen’s Houthis on the United Arab Emirates, the third-largest producer in the Organization of the Petroleum Exporting Countries (OPEC), heightened geopolitical risks.
The OPEC+ producer group comprising OPEC and allies led by Russia has been producing less than its targets, with the International Energy Agency (IEA) on Wednesday estimating that the group produced about 800,000 barrels per day (bpd) below its December targets.
The IEA said that while the oil market could be in a significant surplus in the first quarter of this year, inventories are likely to be well below pre-pandemic levels. The agency also upgraded its 2022 demand forecast.
PVM’s Varga said that high inflation rates and the prospect of rising interest rates represent downside risks to the oil price rally.
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