By Yuka Obayashi

TOKYO (Reuters – Oil futures rose Monday as traders bet that supplies will remain tight despite a restrained output from major producers and a global demand not affected by Omicron coronavirus.

Brent crude oil futures rose 0.5% to $86.48 per barrel at 0022 GMT. This contract reached its peak on Oct. 3, 2018, at $86.71 (earlier in the session).

U.S. West Texas Intermediate crude rose 0.7% to $84.44/barrel after touching $84.78, its highest price since Nov. 10, 2021.

This follows a rally that saw Brent rise 5.4%, and WTI climb 6.3% last week.

Due to supply shortages and indications that Omicron will not be as disruptive for fuel demand, some grades of crude oil have risen to multi-year records. This has led traders to believe the Brent futures rally may be sustained.

Toshitaka Tazaawa, an analyst at Fujitomi Securities Co Ltd. said that the bullish sentiment has continued because (producer group), OPEC+ isn’t providing enough supply for strong global demand.

“Investment funds could increase their allocation weight for crude oil, which would lead to prices reaching highs in 2014,” he stated.

Organization of the Petroleum Exporting Countries, (OPEC), and its allies – OPEC+ – are slowly relaxing the output cuts that were implemented after 2020’s demand collapse.

However, many small producers are unable to increase supply. Others have been cautious about pumping too much oil in the event of new COVID-19 setbacks.

The price of oil has risen due to fears that Russia could attack Ukraine from the neighboring country.

Officials from the United States expressed concerns on Friday about Russia’s plans to strike Ukraine, if diplomacy fails. Russia released photos of its troops, after it had deployed 100,000 soldiers to the border with Ukraine.

According to two U.S. official and industry sources, talks have been held between the U.S. and several foreign energy companies about contingency plans that would allow for supplies to Europe in case Russia and Ukraine conflict.

According to the Energy Information Administration, while oil stocks fell further than was expected, they still reached their lowest levels since Oct 2018. However, gasoline inventories rose due to low demand.

Tazawa from Fujitomi said that concerns about supply shortages outweighed China’s possibility of oil release from reserve.

Sources tell Reuters that China intends to open its oil reserves between the Lunar New Year holidays Jan. 31-February 6, as part of a joint plan by the United States, other major buyers to decrease global prices.