Oil prices jumped 3% at the end of trading weekend and were at a new high in
seven years. The sentiment in favor of oil came from growing fears of an
invasion of Ukraine by Russia, which added to concerns over tight global
crude supplies.
Friday (11/2), the price of Brent crude oil futures for delivery in April
2022 jumped US$3.03 or 3.3% and closed at US$94.44 per barrel.
Meanwhile, the price of West Texas Intermediate (WTI) crude oil futures for
delivery in March 2022 also rose US$3.22 or 3.6% and closed at US$93.10 per
barrel.
Both benchmark prices touched their highest levels since late 2014,
surpassing the highs reached on Monday (7/2). Where, Brent is up 1.3% on the
week and WTI is up 0.9% on the week.
The prices of both oil benchmarks also posted eight straight weeks of gains
amid growing concerns about global supply as demand recovers from the
coronavirus pandemic.
Trading volume surged in the last hour of trading, with volume for global
benchmark Brent rising to its highest level in more than two months.
"The market didn't want to be left behind going into the weekend, because an
invasion looked imminent and you knew there would be retaliatory sanctions
that would result in disruptions to natural gas and oil supplies," said
Andrew Lipow, president of Lipow Oil Associates in Houston.
The main catalyst that sent oil prices soaring sharply came after Russia was
found to have re-gathered enough troops near Ukraine.
The US government said it was done to launch a major invasion. Washington
has urged all US citizens in Ukraine to leave the country within 48 hours.
On the other hand, Britain also advised its citizens to leave Ukraine as
Prime Minister Boris Johnson stressed the need for NATO allies to make it
clear that there would be a package of tough economic sanctions ready to be
implemented if Russia attacked Ukraine.
On the other hand, the International Energy Agency (IEA) raised its oil
demand forecast for 2022 and expects global demand to increase by 3.2
million barrels per day (bpd) this year and reach an all-time record of
100.6 million bpd.
The energy watchdog's report follows warnings by the Organization of the
Petroleum Exporting Countries earlier this week that world oil demand may
increase more sharply this year due to a strong post-pandemic economic
recovery.
The IEA added that Saudi Arabia and the United Arab Emirates could help calm
volatile oil markets if they pumped more crude. The IAE added that the OPEC+
alliance produced only 900,000 barrels per day below its January target.
Saudi Arabia and the UAE are seen as having the most spare production
capacity and could help reduce dwindling global oil inventories which have
been one of the factors pushing prices towards $100 a barrel, deepening
inflation worldwide.
The Biden administration responded to high prices by re-stating that it had
spoken to major producers about more production, as well as possible
additional strategic releases from major consumers, as happened late last
year.
In addition, indirect nuclear talks between the US-Iran resumed this week
after a 10-day break. A deal could see the lifting of sanctions on Iranian
oil and easing supply tightness.
In the United States, drillers added the most oil rigs in a week in four
years, with rig count, an indicator of future production, rising 19 to 516,
the highest since April 2020, energy services firm Baker Hughes Co. said.
