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Copper Tip Energy

Oil Rallies With Focus on Stockpile Draw, Ukraine

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(Bloomberg) Brent oil climbed toward $89 a barrel after industry estimates showed a draw in U.S. stockpiles and investors tracked tensions over Ukraine.

The global crude benchmark rose 0.9% in London. The American Petroleum Institute reported a 875,000-barrel weekly drop in U.S. crude stockpiles, according to people familiar with the data. If confirmed by government figures later Wednesday, it would be the eighth decline in nine weeks. The oil market’s structure has also surged in recent days, signaling tight supply.

Wider markets also rallied on Wednesday, as this week’s selloff started to ease.

Brent's backwardation is growing, indicating tight supplies

Crude is having a volatile week, retreating Monday then rebounding Tuesday. Prices remain close to a seven-year high with demand continuing to recover from the pandemic as mobility picks up. A string of Wall Street banks including Goldman Sachs Group Inc. have forecast oil will hit $100 a barrel this year as the global market tightens.

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“The market has basically been in persistent undersupply since mid-2020, thanks to OPEC+ cuts and a continued oil demand recovery,” said Helge Andre Martinsen, a senior oil analyst at DNB ASA. “We fully acknowledge that the world is not running out of oil resources, but we might enter an oil-market squeeze triggered by too little investment and oil demand rebounding quickly.”

Prices have also reacted to mounting concern over a possible Russian incursion into Ukraine, with U.S. President Joe Biden saying he’d consider sanctioning Vladimir Putin if the Russian leader orders an invasion. However, while a potential conflict carries large risks for financial markets — especially energy commodities such as gas and oil — Goldman Sachs’s base case is for no disruption to supplies.

  • Brent for March settlement rose 0.9% to $88.98 a barrel at 10 a.m. in London.
  • West Texas Intermediate for March delivery advanced 53 cents to $86.13 a barrel.

Also in focus Wednesday is the Federal Reserve’s first policy-setting meeting of the year. Officials are expected to reaffirm their commitment to containing roaring inflation by ending stimulus and raising interest rates over 2022.

Related coverage:
  • More Chinese are joining a great travel rush back to their home towns for the Lunar New Year holiday, aiding oil demand.
  • Saudi Aramco may increase its official selling price of Arab Light crude by 55 cents a barrel for March sales to Asian customers.
  • Surging energy prices and a tight rein on spending have driven Big Oil’s cash flow to a new high, enticing back investors.
  • Qatar’s emir will visit President Joe Biden on Jan. 31 and discuss issues including how to ensure stability of global energy supplies.

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