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Oil climbs as supplies expected to remain tight

CommoditiesJan 17, 2022 02:05PM ET
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© Reuters. FILE PHOTO: Crude oil storage tanks are seen in an aerial photograph at the Cushing oil hub in Cushing, Oklahoma, U.S. April 21, 2020. REUTERS/Drone Base/File Photo

By Noah Browning and Bozorgmehr Sharafedin

(Reuters) -Oil prices rose on Monday with investors betting that global supply will remain tight, although restraint by major producers was partially offset by a rise in Libyan output.

Brent crude settled up 42 cents, or 0.5%, to $86.48 a barrel. Earlier in the session, the contract touched its highest price since Oct. 3, 2018, at $86.71.

U.S. West Texas Intermediate crude was up 53 cents, or 0.6%, at $84.35 after touching its highest price since Nov. 10 at $84.78. Trade was subdued due to the U.S. holiday honoring slain civil rights leader Martin Luther King Jr.

Frantic oil buying, driven by supply outages and signs the Omicron coronavirus variant will not be as disruptive to fuel demand as previously feared, has pushed some crude grades to multi-year highs, suggesting the rally in Brent futures could be sustained for a while longer, traders said.

"The bullish sentiment is continuing as (producer group) OPEC+ is not providing enough supply to meet strong global demand," said Fujitomi Securities analyst Toshitaka Tazawa.

The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, together known as OPEC+, are gradually relaxing output cuts implemented when demand collapsed in 2020.

But many smaller producers cannot increase supply and others have been wary of pumping too much oil in case of renewed COVID-19 setbacks.

Meanwhile, Libya's total oil output is back to 1.2 million barrels per day (bpd), according to National Oil Corp. Libyan output was about 900,000 bpd last week owing to a blockade of western oilfields.

"Libya’s oil production had dropped to a good 700,000 bpd at the start of the year, which had played its part in the price rise," said Commerzbank (DE:CBKG) analyst Carsten Fritsch.

Concerns over supply constraints outweighed the news of China's possible oil release from reserves, said Fujitomi's Tazawa.

Sources told Reuters that China plans to release oil reserves around the Lunar New Year holidays between Jan. 31 and Feb. 6 as part of a plan coordinated by the United States to reduce global prices.

Saudi Energy Minister Prince Abdulaziz bin Salman said on Monday it is the prerogative of the U.S. government whether to release supply from strategic petroleum reserves.

Festering geopolitical threats to supply are also supporting bullish sentiment, analysts said.

U.S. officials voiced fears on Friday that Russia was preparing to attack Ukraine if diplomacy failed. Russia, which has amassed 100,000 troops on Ukraine's border, released pictures of its forces on the move.

Oil climbs as supplies expected to remain tight
 

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Comments (6)
Brady Murray
Brady Murray Jan 17, 2022 5:18PM ET
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Love it liberals thank you. Discourage exploration, financing, shut down pipeline and weak foreign policy. Oil to 115. Lets go!!!!!! Long MPC APA CVX!!!! Enjpy the pump pain!!!
Totaltwo Sam
CryptoSam Jan 17, 2022 5:16PM ET
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big wick coming for crude.. most likely $150 per barrel
jerry mcbride
jerry mcbride Jan 17, 2022 2:06PM ET
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Thank you, Joe Biden, for the high gas price
David Deane
David Deane Jan 17, 2022 2:06PM ET
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the biggest stooge president ever
Jay Garrelts
Jay Garrelts Jan 17, 2022 2:06PM ET
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Thank you Donald Trump for signing the deal with OPEC that is affecting gas prices right now lol
Eat The Cat Media
Eat The Cat Media Jan 17, 2022 2:06PM ET
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brilliant
Andrew Ulferts
Andrew Ulferts Jan 16, 2022 11:43PM ET
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China has a very small reserve stockpile. Fyi.
TR Ko
TR Ko Jan 16, 2022 11:07PM ET
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Price will go down now. Look up China set to release oil from reserves at end of month
Strat Afro
Strat Afro Jan 16, 2022 8:50PM ET
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The competition is coming from Libya and Iran and Kazakhstan. Rooting for Big Drop. 😎
Roberta Garrett
Roberta Garrett Jan 16, 2022 8:50PM ET
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plus the slow down in China production. anyone else paying attention to the numbers for gdp and pmi coming out of the 2nd largest economy? what are you hedging with and thoughts?
 
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