Oil rose as leading market participants said they expect global demand to continue its powerful recovery from the pandemic and tensions mounted over Ukraine, reports Yahoo Finance.
Demand surge in Asia
West Texas Intermediate traded near $92 a barrel and Brent climbed back above $95 as Saudi Aramco, the world’s largest producer, said it sees signs that demand is rising, especially in Asia. The chief executive officer of Vitol Group, the world’s biggest independent oil trader, said in a Bloomberg Television interview that prices could surpass $100 a barrel for a sustained period.
“Demand is going to surge in the second half” and exceed 100 million barrels a day if travel continues to return to normal,” Vitol Group CEO Russell Hardy told Bloomberg television. “Eventually we’re going to run out of spare capacity.”
Oil traders are also closely following escalating tensions between Russia and the West over Ukraine. Prices extended gains after Russian President Vladimir Putin said he will decide later Monday whether to officially recognize separatists in eastern Ukraine, a move that would likely torpedo European-mediated peace talks. The Kremlin has repeatedly denied it intends to attack Ukraine.
No concrete plans
The Kremlin said there are “no concrete plans” for a summit between U.S. President Joe Biden and Putin, throwing into question the fate of a French proposal that seemed to offer fresh optimism for averting any possible attack on Ukraine.
The U.S. told allies that any Russian invasion would potentially see it target cities beyond the capital, Kyiv. Moscow, which has repeatedly denied it plans an invasion, said over the weekend that its forces would remain in Belarus indefinitely.
“The concern is that if tension in Eastern Europe escalates further that some of this supply might get disrupted intentionally or driven by political divisions,” affecting not only energy but other commodities, said Giovanni Staunovo, a commodity analyst at UBS Group AG. “I would expect the market to continue to react in a sensitive way.”
Adding to the bullish sentiment, several of OPEC+’s biggest oil producers want the group to continue with its strategy and add another 400,000 barrels a day of crude to the market in April, according to people familiar with the matter. That comes despite calls for OPEC+ to increase output faster amid tight supplies.
Ramping up run rates
Trading volumes were below normal levels on Monday as several market participants were away due to the Presidents’ Day holiday in the U.S. Natural gas prices fell sharply on the prospects of a Biden-Putin summit.
Oil investors are also following negotiations to rekindle Iran’s 2015 nuclear agreement, which has made some progress, Iran’s Foreign Ministry Spokesman Saeed Khatibzadeh said in a press conference. Though the remaining issues are the hardest ones, he added.
In a signal of the crude market’s bullishness, nearby contracts for WTI and Brent are commanding significant premiums over those further out, indicating that traders are clamoring for barrels right now. In Asia, refiners are seeking to ramp up their run rates to benefit from healthy margins.
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Source: Yahoo Finance
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