At a high of more than 7 years, oil ended on Wednesday, as geopolitical tensions and optimistic expectations for the development of demand this year continued the price rally.
“Brent and US crude prices have reached new seven-year highs as geopolitical tensions have helped keep prices ‘down’, and the temporary shutdown of the oil pipeline between Iraq and Turkey has “intensified the complexity of the situation with regard to oil prices and keeps markets alert,” said Michael Hewson, chief market analyst at CMC Markets UK.
The latest development, which has exacerbated geopolitical concerns and sparked fears of supply disruptions, has been the temporary closure of the 450,000-barrel Argon pipeline in southeastern Turkey, however, due to an explosion near restored soon. Officials said the blast caused an electric pylon to fall, and was not an attack.
Initial reports of an attack, however, pushed up crude contracts, which lost some of their profits after the attack was denied, as they showed how sensitive the market is to fears of a supply disruption.
Meanwhile, the International Energy Agency’s current estimates that oil demand will exceed pre-pandemic levels this year provided additional support for oil prices.
In particular, the IEA raised estimates of the level of demand citing rising rates of coronavirus immunization and the fact that the recent waves of the Omicron pandemic have not proved serious enough to justify a return to strict quarantine measures.
In its monthly report on the oil market, the IEA raised its estimate for oil demand for next year, by 200,000 barrels per day, to 3.3 million barrels per day.
West Texas Intermediate crude traded up $ 1.53, or 1.8%, to close at $ 86.96 a barrel on the New York Mercantile Exchange, hitting $ 87.92 earlier on Wednesday. The March delivery of US crude, which will be the next contract after closing on Thursday, also strengthened by 97 cents or 1.1% and closed at $ 85.80.
The March contract for Brent also gained, which added 93 cents or 1.1% and closed at $ 88.44 a barrel, having previously climbed to $ 89.17.
Both contracts are at the highest level since October 2014.