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Hazloc Heaters
Copper Tip Energy
Hazloc Heaters

Oil Trades Near Highest Since 2014 on Tightening Market

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These translations are done via Google Translate
Brent oil traded near the highest intraday level since 2014 as the market tightened and concerns about the impact of omicron eased.

Futures in London held at about $86 a barrel after a fourth weekly advance on Friday, with gains tempered by signs of slowing Chinese economic growth. High prices are justified and futures could rise even further, according to trader Vitol Group. Oil’s market structure has firmed in a bullish backwardation pattern, indicating growing supply tightness.

Oil has maintained its upward momentum as the market tightens

Oil has rallied more than 10% so far this year, in part due to outages in OPEC+ producers including Libya. The International Energy Agency said last week that global consumption has turned out to be stronger than expected, while the physical market is booming as buyers look beyond the spread of omicron.

“There is a genuine belief that physical demand will keep exceeding supply,” said Tamas Varga, an analyst at brokers PVM Oil Associates Ltd. “On the demand side, the cold winter in North America is one of the major factors. Mild omicron symptoms and hopes that the rapid rise in cases is about to abate also contributed to the strength.”

  • Brent for March settlement was steady at $85.87 a barrel on the ICE Futures Europe exchange at 10:09 a.m. in London after climbing 1.9% on Friday.
    • Futures rallied to $86.71 earlier, 4 cents shy of the highest level since October 2014.
  • The prompt timespread for Brent was 70 cents in backwardation, compared with 57 cents a week earlier.
  • West Texas Intermediate for February delivery was little changed at $83.75 on the New York Mercantile Exchange.

The Covid-Zero policy employed by China will probably ensure that there’s no omicron outbreak big enough to significantly diminish the use of oil products there, Mike Muller, Vitol’s head of Asia, said Sunday during a webinar hosted by Dubai-based consultants Gulf Intelligence.

China’s central bank, meanwhile, cut its key interest rate for the first time in almost two years to help bolster an economy that’s lost momentum because of a property slump and repeated virus outbreaks. Official data Monday showed gross domestic product rose 4% last quarter from a year earlier, the weakest since early 2020.

Other market news:
  • China’s oil processing volumes rose more than 4% to a record last year as state-owned refiners boosted output and new integrated plants came online.
  • Sales of Iranian crude oil, gas condensates and petrochemical products have risen dramatically in the past 10 months, the country’s oil minister said.
  • Libya’s oil production has picked up again after a blockade of its western fields ended and ports in the east reopened. Output is around 1.2 million barrels a day, Energy Minister Mohamed Oun said Sunday.

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