SINGAPORE (Reuters) – Oil prices climbed on Friday, extending sharp gains in the previous session as frigid weather swept across large swathes of the United States, threatening to further disrupt oil supplies. Brent crude rose 42 cents, or 0.5%, to $91.53 a barrel by 0745 GMT, after rising $1.16 on Thursday. U.S. West Texas Intermediate crude rose 52 cents, or 0.6%, to $90.79 a barrel, having gained $2.01 the previous day to settle above $90 for the first time since Oct. 6, 2014. “WTI crude surged over the $90 level after an Arctic blast made its way to Texas and disrupted some oil production in the Permian Basin,” said Edward Moya, senior market analyst at OANDA. A massive winter storm swept across the central and Northeast United States on Thursday where it was delivering heavy snow and ice, making travel treacherous if not impossible, knocking out power to thousands and closing schools in several states. Tight oil supplies pushed the six-month market structure for WTI into steep backwardation of $8.08 a barrel on Friday, 7 cents shy of an eight-year high of $8.15 on Nov. 29. Backwardation occurs when prices for prompt spot trade are at a premium to future prices, and usually encourages traders to take oil out of storage. As recovering demand is outpacing supply, oil markets are increasingly vulnerable to supply interruptions, analysts said. “Even as thousands of flights are cancelled, the energy market is fixated over production and not so much short-term demand shocks,” said Moya. Geopolitical tensions in Eastern Europe and the Middle East have also fuelled oil’s sharp gains which have pushed Brent and WTI futures up by about 18% and 21%, respectively, so far this year. The United States warned that Russia was planning to use a staged attack as justification for invading Ukraine. Russia’s President Vladimir Putin has blamed NATO and the West for increased tensions, even as he has moved thousands of troops near to Ukraine’s border. “With geopolitical risk in Ukraine and only gradual increase of production by OPEC+, prices are expected to head toward $100 a barrel,” Chiyoki Chen, chief analyst at Sunward Trading said. The Organization of the Petroleum Exporting Countries and allies led by Russia, known as OPEC+, agreed earlier this week to stick to moderate rises of 400,000 barrels per day (bpd) in oil output with the group already struggling to meet existing targets and despite pressure from top consumers to raise production more quickly. Over the medium term, however, some analysts expect the oil market to flip into surplus as soon as next quarter, helping put the brakes on the recent surge in prices. “We expect the sequential trend of quarterly global stock draws will flip to inventory builds as soon as 2Q’22, and sustain for the next 15-18 months,” analysts at Citi Research said in a note late on Thursday. “Our view is for a tight crude oil market to shift to surplus outright and in terms of days of demand cover.”
(Reporting by Roslan Khasawneh; editing by Simon Cameron-Moore)
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After a month in which oil prices surged 15% and geopolitical tensions seethed around the world, OPEC and its allies took a record-quick 16 minutes to decide that they would stick to their previously planned output increase. Apparently, there were no lengthy discussions at Wednesday’s meeting about member nations of the producer group failing to hit their production targets or about one of the busiest months on the geopolitical front in years, featuring: a potential war between Russia and Ukraine; rare unrest in Kazakhstan; hints of progress in nuclear talks progress between the United States and Iran; and repeated Houthi drone attacks on the United Arab Emirates. They instead chose to complete their regular monthly meeting in record time, avoiding any thorny discussions.
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(Bloomberg) — Oil powered toward a seventh straight weekly gain as investors zeroed in on a fast-tightening global market and geopolitical tensions U.S. supplies of fuels such as diesel and heating oil have dwindled and refiners are having trouble replenishing that supply, which could keep prices elevated for months. Demand for diesel, heating oil and other products has been running ahead of pre-pandemic levels for months. As of Thursday, heating oil futures were priced at $2.83, the highest price in seven year President Joe Biden, who had asked OPEC+ to raise oil production faster to tame runaway energy prices, got a gift on his home turf instead: a blockbuster growth forecast for U.S. shale production from the country’s two biggest oil companies. NN: Two factors are driving the price increases in oil. Ukraine and inventory levels. Reality is Ukraine will sort out the will she or won’t she Putin mystery before the ground turns into mud in the next 6 weeks. In that time the ground defrosts and the mud would bog down any attack. Also Northern hemisphere winter ends and demand drops dramatically. Despite market myth they are off to the races.. US producers are ramping up output to beat the band. Oil companies are the most profitable they have ever been. Flush with cash they are taking advantage of what they know is a temporary phenomenon. They can hedge oil at these prices and recover their capital expenses. Once that is done continuing production is profitable at any price. Take oil prices a year out and oil is ordaining at a $10 discount to spot. The higher they take prices the more oil comes to market for years into the future. And the more demand high prices remove from the market. So its just a matter of timing before we begin shorting operations.