Oil heads for sixth weekly gain amid supply concerns
Oil prices rose on Friday, set for their sixth weekly
gain, amid concerns of tight supplies as major producers continue their policy
of limited output increases amid rising fuel demand.
Brent crude futures climbed 45 cents, or 0.5 percent, to
$89.79 a barrel at 0429 GMT, after falling 62 cents during the previous day.
However, prices did reach $91.04 earlier in that session, the highest since
October 2014.
U.S. West Texas Intermediate (WTI) crude futures rose 50
cents, or 0.6per cent, to $87.11 a barrel, having declined 74 cents on
Thursday. WTI also reached a seven-year high of $88.54 earlier in the session.
Both Brent and WTI are set to rise for a sixth week, the
longest weekly streak since October, when Brent prices climbed for seven weeks
while WTI gained for nine.
This year, prices have gained about 15per cent amid
geopolitical tensions between Russia, the world's second-largest oil producer
and a key natural gas provider to Europe, and the West over Ukraine as well as
threats to the United Arab Emirates from Yemen's Houthi movement that have
raised concerns about energy supply.
"Where Brent crosses $90 level, we see some selling
from a sense of accomplishment, but investors start buying again when the
prices fall a little as they remain cautious about possible supply disruptions
due to rising geopolitical tensions," said Tatsufumi Okoshi, senior economist
at Nomura Securities.
"The market expects supply will stay tight as the OPEC+
is seen to keep the existing policy of gradual increase in production," he
said
The market is focusing on a Feb. 2 meeting of the
Organization of the Petroleum Exporting Countries (OPEC) and allies led by
Russia, a group known as OPEC+.
OPEC+ is likely to stick with a planned rise in its oil
output target for March, several sources in the group told Reuters.
An increase in oil output by producer nations cashing in on
expensive crude has depleted the cushion of spare capacity that protects the
market from sudden shocks and raised the risk of price spikes or even fuel
shortages.
"OPEC has been struggling to increase output in line
with the agreed rise in quotas ... In effect, spare capacity is at a level
which may not be enough to cover any geopolitical disruptions," analysts
from ANZ Research said in a note on Friday.
"We see the market remaining in deficit in Q1 2022.
With supply constraints likely to be a feature of the oil market for a while,
we see markets pricing in a sizeable risk premium," said ANZ, adding that
it raised its short-term oil price target to $95 per barrel.
On the demand side, crude oil imports in China, the world's
biggest importer of the commodity, could rebound by a much as 7per cent this
year, reversing 2021's rare decline as buyers step up purchases for new
refining units and to replenish low inventories, analysts and oil company
officials said.
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