Oil rose towards $89 a barrel on Wednesday, within sight of a seven-year high, supported by tight supply and geopolitical tensions in Europe and West Asia that raise concerns about further disruptions.
U.S. President Joe Biden said on Tuesday he would consider personal sanctions on President Vladimir Putin if Russia invades Ukraine. On Monday, Yemen’s Houthi movement launched a missile attack on a United Arab Emirates base.
“Anxiety over potential supply disruptions in the Middle East and Russia is providing bullish fodder for the oil market,” said Stephen Brennock of oil broker PVM.
Brent crude rose 61 cents, or 0.7%, to $88.81 at 0917 GMT. On Jan. 20 it reached $89.50, the highest since October 2014. U.S. West Texas Intermediate (WTI) crude was up 25 cents, or 0.3%, to $85.85.
“The market downside is limited due to heightened tensions between Russia and Ukraine and the threat to infrastructure in the UAE,” said Hiroyuki Kikukawa, general manager of research at Nissan Securities.
Underlining a tight supply and demand balance, the weekly U.S. inventory report from the American Petroleum Institute on Tuesday showed crude stocks fell by 8,72,000 barrels, market sources said.
Investors across the markets are also awaiting the update from the U.S. Federal Reserve. The Fed is expected to signal plans to raise interest rates in March as it focuses on fighting inflation.
OPEC+ to meet
In another key development, the Organization of the Petroleum Exporting Countries and allies, known as OPEC+, meets on Feb. 2 to consider another output increase.
OPEC+ has been gradually unwinding 2020’s record output cuts, raising its monthly target by 4,00,000 barrels per day, though the actual increase in supply has fallen short of that as some countries struggle to raise production.
OPEC+ will probably stick with a planned increase in output target for March, several sources from the group said, as it sees demand recovering despite downside risks from the pandemic and looming interest rate rises.
