The black liquid is marginally bearish towards the start of the London session after hitting 2014 highs indicating that investors are taking profits. However, strong fuel demand and tight supply remained factors to limit losses.
The global benchmark, the Brent oil futures is marginally down by 0.14%, currently trading $88.32, after hitting $89.13, its highest since October 2014, during the previous session.
The United States benchmark, the West Texas Intermediate (WTI) futures is also down marginally by 0.01%, currently trading $85.79, as of the time of this writing.
Supply concerns have mounted this week after Yemen’s Houthi group attacked the United Arab Emirates, the third-largest producer in the Organization of the Petroleum Exporting Countries and its allies (OPEC+).
Meanwhile, Russia, the world’s second-largest oil producer, has built up a large troop presence near Ukraine’s border, stoking fears of invasion and subsequent supply uncertainties.
What you should know
- There was an explosion on Tuesday, near the Kirkuk-Ceyhan pipeline in Southeastern Turkey, which halted the flow of crude. However, supply through the pipeline has resumed, officials said a day later.
- Tensions between Russia and the U.S. over Ukraine also remain high, with a large Russian presence built up near the border with Ukraine. Concerns about a potential armed conflict and subsequent supply disruptions are also mounting.
- A broad recovery in fuel demand globally, combined with a tightening market, is also adding to the black liquid’s price action.
- The OPEC+ is struggling to hit its monthly output increase target of 400,000 barrels per day (bpd). Some investors are also predicting that an oil rally may continue in the next few months, where prices could top the $100 mark.
ANZ bank analysts stated in a note that, “The International Energy Agency said global oil demand is on track to hit pre-pandemic levels. Shorter-term supply disruptions are also helping tighten markets. Brent futures rallied sharply after reports a key oil pipeline running from Iraq to Turkey was knocked out by an explosion.”
Yesterday’s U.S. crude oil supply from the American Petroleum Institute (API) showed a build of 1.404 million for the week ending Jan. 7.
Forecasts prepared by Investing.com predicted a 1.367-million-barrel draw, and the 1.077-million-barrel draw was recorded during the previous week
Investors now await crude oil supply from the U.S. Energy Information Administration (EIA), due later in the day.