Updates on settlement prices

Peter Nurse   

Investing.com — Wednesday’s rise in oil prices was due to turmoil in Kazakhstan, which threatened disruption of supplies from one the biggest producers of crude oil in the world and a member the OPEC+ cartel. 

The London-traded benchmark oil price was up 1.5% to $81.99/barrel. Brent rose almost 6% in the past year.

The benchmark oil price for the United States was $79.46/barrel. This $1.61 (or 2.1%) increase in WT is a result of the U.S. crude index. The WT also rose 6% in the year 2022.

Russia deployed troops to neighboring nations in an attempt to stop violent protests that may have been sparked by the recent steep rise in fuel costs. Although no signs have been found that oil production has suffered, the former Soviet country is still producing approximately 1.6million barrels per hour.

This is a further indication that the Organization of the Petroleum Exporting Countries, its allies (including Russia), will face difficulties in boosting oil output for February.

“A number of OPEC producers have produced below their agreed output levels for several months now due to disruptions and a lack of investment in fields,” said analysts at ING, in a note.

Due to oilfield closures and pipeline maintenance, Libya’s oil production is also down more than 500,000 barrels per hour.

Only two big producers in the world – Saudi Arabia and the United Arab Emirates – are currently able to pump more oil than they did two years ago, according to Goldman Sachs’ head of commodity research Jeff Currie.

Goldman Sachs is “extremely bullish” on commodities, Currie said, amid a super-cycle that has the potential to last for a decade.

The influential investment bank’s target price for in the first quarter is $85 a barrel, but that was under the assumption that Iranian production would return later in the year, which is looking increasingly unlikely, he added. 

This bullish outlook on crude oil prices has one problem: the spread of Omicron Covid-19, which the U.S. set a new global record for this variant earlier in the week with more than 1,000,000 daily cases. It could result in more aggressive measures to limit mobility, or even less demand for travel, if this trend continues. 

According to data from the U.S. Energy Information Administration, Wednesday’s surge was more than 10,000,000 barrels, which is the highest weekly gain since April 2020. It suggests that this may be a real possibility.

OPEC+, however, stated that the Omicron variation would have a minimal impact on the demand for its products in a technical report issued earlier this week. They said it would only be temporary.

Additional reporting by Barani Srikan