Oil rises, hovers near 7-year highs on supply fears, political risks
Oil rose 1per cent on Monday, hovering near 7-year
highs hit in the previous session, amid concerns over tight supply as well as
geopolitical tensions in Eastern Europe and the Middle East.
Brent crude rose 92 cents, or 1.0per cent, to $90.95 a
barrel at 0051 GMT, after adding 69 cents on Friday. The front-month contract
for March delivery expires later in the day.
The most-active Brent contract, for April delivery, was trading at $89.69, up $1.17 or 1.3 percent.
U.S. West Texas Intermediate crude rose 99 cents, or 1.1per
cent, to $87.81 a barrel, having gained 21 cents on Friday.
Both benchmarks recorded their highest since October 2014 on
Friday, $91.70 and $88.84, respectively, and a sixth straight weekly gain.
"Underlying anxiety about global supply shortages,
coupled with ongoing geopolitical risks, have caused the market to start the
week on a strong note," said Toshitaka Tazawa, an analyst at Fujitomi
Securities Co Ltd.
"With an expectation that OPEC+ will keep the existing
policy of gradual increase of production, oil prices will likely stay on a
bullish sentiment this week," he said, predicting Brent to remain above
$90 a barrel and WTI to head toward $90.
Major producers in the Organization of the Petroleum
Exporting Countries (OPEC) and allies led by Russia, collectively known as
OPEC+, have raised their output target each month since August by 400,000
barrels per day (bpd) as they unwind record production cuts made in 2020.
But they have failed to meet their production targets as
some members have struggled with capacity constraints.
At its Feb. 2 meeting, OPEC+ is likely to stick with a
planned rise in its oil output target for March, several OPEC+ sources told
Reuters, as it sees demand recovering despite downside risks from the pandemic
and looming interest rate rises.
Tensions between Russia and the West also underpinned crude
prices. Russia, the world's second-largest oil producer, and the West have been
at loggerheads over Ukraine, fanning fears that energy supplies to Europe could
be disrupted.
The head of NATO said on Sunday that Europe needs to
diversify its energy supplies as Britain warned it was "highly
likely" that Russia was looking to invade Ukraine.
The market is also on alert over the Middle East situation
after attacks on United Arab Emirates by Yemen's Houthi group.
Meanwhile, more than 1,400 U.S. flights were cancelled on
Sunday after the U.S. northeast states were walloped a day earlier by a deadly
winter storm that prompted several states to declare emergencies.
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