By Yuka Obayashi

TOKYO, Reuters – Oil prices rebounded on Tuesday as concerns about possible disruptions in supply grew due to tensions in Eastern Europe, the Middle East, and Eastern Europe.

Futures gained 0.7% to $86.88 per barrel by 0722 GMT, after reaching a session record of $87.27 per barrel earlier. This reverses a 1.8% drop in the previous session.

U.S. West Texas Intermediate oil futures (WTI), rose 44c, or 0.5%, at $83.75/barrel after sliding 2.2% on Monday.

The tight global supply and rebounding global demand fueled oil prices to seven-year highs last Wednesday.

Chiyoki Ch, Sunward Trading’s chief analyst, stated, “The market tone is strong,” adding that the geopolitical risk has increased.

He said that while profit taking is evident when oil prices rise, the buying of crude oil continues to be strong as investors worry about disruptions to supply in the case Russia-Ukraine conflicts.

NATO stated Monday it is putting its forces on standby, strengthening eastern Europe and adding more fighter jets and ships to the mix. The move was in response by Russia as Western “hysteria”, which they denounced.

The Houthi rebel movement in Yemen, aligned to Iran, launched Monday’s missile attack on the United Arab Emirates. It targeted the base that houses the U.S. military. However, it was stopped by U.S. Patriot interceptors.

Satoru Yoshida (a commodity analyst at Rakuten Securities) stated that “downside risk” on the oil markets will be minimal as any escalations in the Ukraine or Middle East situation will result in the price skyrocketing.

He said that supply shortages are expected to persist as OPEC+ struggles to meet its output targets and would likely continue its gradual supply increase policy.

OPEC+ (Organization of the Petroleum Exporting Countries) is facing difficulties in reaching its target of 400,000 barrels/day (bpd) for monthly output growth.

Lower U.S. oil inventories also support the market. The crude inventory around Cushing (Oklahoma) is the lowest at this time since 2012.

Portfolio investors upgraded their bullish oil positions for the fifth week in a row, after the worst coronavirus outbreaks passed. Also, governments lifted restrictions on travel and business.