Oil prices edged higher on Tuesday, trading near seven-year highs hit last week, as investors bet supplies will stay tight, with a limited production hike by major oil producers and a strong post-pandemic recovery in fuel demand.
Brent crude for April delivery was up 14 cents, or 0.2% at $89.40 a barrel at 0150 GMT. The front-month contract for March delivery expired on Monday at $91.21 a barrel, up 1.3%.
U.S. West Texas Intermediate crude rose 13 cents, or 0.2%, to $88.28 a barrel, having gained 1.5% in the previous day.
The benchmarks hit their highest levels since October 2014 on Friday, at $91.70 and $88.84, respectively. They have gained about 17% in January, the biggest monthly gain since February 2021, amid a supply shortage and geopolitical tensions in Eastern Europe and the Middle East.
“The market is maintaining a bullish tone on expectations that supply tightness will continue as demand is picking up, with receding fears over spreading Omicron coronavirus variant,” said Hiroyuki Kikukawa, general manager of research at Nissan Securities.
“All eyes are on OPEC+ decision as well as the development of the conflict between Russia and the West over Ukraine,” he said, predicting WTI could reach $90 a barrel soon.
OPEC+ Outlook Likely to Affect Oil Prices.
Market analysts and Reuters sources widely expect OPEC+, which groups the Organization of the Petroleum Exporting Countries and allies led by Russia, to keep to its policy of gradual production increases when it meets on Wednesday.
OPEC’s oil output in January has again undershot the rise planned under a deal with allies, a Reuters survey found on Monday, highlighting some producers’ struggle to pump more even as prices are high.
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 United States and Britain are prepared to punish Russian elites close to President Vladimir Putin with asset freezes and travel bans if Russia enters Ukraine, Washington and London said on Monday as tensions also spilt over at the United Nations.
The risk of geopolitical disruptions to oil supply at a time of already tight inventories due to the strong post-pandemic recovery has sent the premium commanded by barrels for prompt delivery soaring, suggesting the current price rally has further to run.