| 1 October 2022, Saturday |

Oil continues rally amid mounting Ukraine tensions

Oil markets rose on Monday, extending the previous week’s gains, on evidence of sustained global demand and mounting anxieties over the Ukraine crisis, which threatens to disrupt energy supply.

Brent, the global benchmark for two-thirds of all oil, increased to $91.24 a barrel. At 8.24 a.m. UAE time, West Texas Intermediate, the benchmark for US oil, was trading at $88.01 a barrel.

Crude has stayed high in recent weeks as geopolitical tensions in Eastern Europe have risen. Following Russia’s decision to post thousands of troops near Ukraine’s border, the Pentagon has placed 8,500 US troops on high alert.

Russia increased its army presence over the weekend, indicating a potential escalation that may disrupt global oil flows.

The spike in oil futures followed an agreement by US senators to adopt legislation on Russian sanctions this week, “ratcheting up tensions on Ukraine,” according to Avtar Sandu, senior manager, commodities at Singapore-based brokerage Phillip Nova, in a note to investors.

“Global oil markets are largely predicted to remain vulnerable to geopolitics in 2022, with’sabre-rattling’ over the ongoing Russia-Ukraine stalemate,” he added.

The Monday surge follows six weeks of weekly advances. Brent is on track to have its best January in three decades.

Crude prices have already risen by more than 10% this year as global economies continue to recover from the epidemic, driving up demand. Last year, oil climbed more than 67% as demand remained strong amid pandemic-related challenges.

Oil prices are also being supported by Opec+’s restrained output. On February 2, the Opec+ group, chaired by Russia and Saudi Arabia, will meet to decide on future production limitations in place to support the oil market. The 23-member group remained committed to increasing output by 400,000 barrels per day in February.

Top banks and oil corporations, on the other hand, predict that petroleum will soon cross $100 per barrel, owing in part to oil producers’ inability to meet their expected supply output increases in recent months. Underinvestment in oil and gas production in recent years has also limited oil firms’ capacity to boost output.

According to JPMorgan, Brent may “overshoot” $125 per barrel this year and $150 in 2023 because Opec’s spare capacity is lower than market estimates, limiting its ability to respond to rising oil prices.

  • The National News