January 31, (THEWILL) – Oil prices continued to surge on Monday as Brent crude, global oil benchmark, hit $91.31 per barrel, ahead of an OPEC+ meeting on Wednesday.
In a market survey on Monday morning, Brent crude rose $1.28, or 1.4%, to $91.31 a barrel, after adding 69 cents on Friday.
US West Texas Intermediate (WTI) crude added $1.14, or 1.3%, to $87.96 a barrel, having gained 21 cents on Friday.
The benchmarks 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 headed for about 17% gains this month, the most since February 2021.
Speaking on the development, an analyst at Fujitomi Securities, Toshitaka Tazawa, said “Underlying anxiety about global supply shortages, coupled with ongoing geopolitical risks, have caused the market to start the week on a strong note.”
“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 added.
Tazawa also predicted that Brent will remain above $90 and WTI will head toward $90.
Major producers in the Organisation 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 February 2 meeting, OPEC+ is likely to stick with a planned rise in its oil output target for March, several OPEC+ sources told Reuters.
Oil prices are showing signs of overheating as traders anticipate a severe shortage of petroleum this year. According to ANZ Research, with the market in deficit and inventories low, “supply constraints will likely induce a sizeable risk premium” as travel picks up after coronavirus curbs.
“Traffic in Europe is rebounding as the Omicron case numbers decline. In the US, gasoline demand is only 4% below 2019 levels, which is a better outcome than expected in November.”
Tensions between Russia and the West have 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 needed to diversify its energy supplies as Britain warned it was “highly likely” that Russia was looking to invade Ukraine.
The market is on alert over the Middle East situation too after the United Arab Emirates said it had intercepted a ballistic missile fired by Yemen’s Houthi as the Gulf state hosted Israel’s President Isaac Herzog in a first such visit.