- WTI hit $87.00 for the first time since September 2014 on Wednesday.
- It was attributed to a momentary interruption of an Iraqi-Turkish oil pipeline that boosted the most recent gains.
- But broader themes of tighter-than-expected market conditions and growing geopolitical concerns also keep oil underpinned.
Oil prices climbed to new multi-year highs on Wednesday and WTI futures of the first month hit the $87.00 per barrel level for the first time since September 2014. Market commentators have cited news of disruption to oil flows along a pipeline that carries crude from northern Iraq to Turkey. Port Ceyhan as behind the latest winning streak. Oil flows along the Kirkuk-Ceyhan pipeline (estimated at around 150,000 barrels per day) have resumed since Wednesday, with the disruption resulting from a downed power pylon, not an attack as some feared.
So overall, a day’s disruption amounts to little more than a drop in the bucket in terms of global oil supply. But the news was enough to give further impetus to the idea that global oil markets in early 2022 are significantly tighter than expected just a few months ago, while demand remains resilient. Remember that smaller OPEC+ nations have struggled to keep up with rising production quotas in recent months, leading to excessively and unintentionally high levels of compliance with the group’s output cut pact (around 127% at the end of 2021).
Meanwhile, geopolitical concerns about security of supply have intensified this week amid fears that Russia – the world’s third-biggest supplier of roughly 11 million barrels a day – could be on the verge of invading Ukraine. Meanwhile, tensions in the Middle East and around the Gulf Strait between the Saudi-led Sunni coalition and Iran-backed Shiite militias based in Yemen rose earlier in the week after the former launched a surprise attack on infrastructure. second oil company.
Although the IEA, in its monthly report released on Wednesday, said oil markets would return to surplus after the first quarter of 2022, the agency raised its global demand growth forecast for the year. The agency also warned that commercial oil and fuel stocks in developed countries had fallen to their lowest levels in seven years and, as a result, any potential reduction in supply this year could result in higher levels of oil market volatility. usual. Analysts continue to demand tighter than expected oil market conditions in 2022 for (Brent) to hit $100 a barrel.
Going forward, attention now turns to the release of weekly US Private API Inventory figures due out at 21:30 GMT and likely to show crude oil stocks running low for the eighth week. consecutive.