MOSCOW (MRC) -- Oil prices rose on Monday, with Brent futures touching their highest in more than three years, as investors bet supply will remain tight amid restrained output by major producers with global demand unperturbed by the Omicron coronavirus variant, reported Reuters.
Brent crude futures gained 40 cents, or 0.5%, to USD86.46 a barrel by 0641 GMT. Earlier in the session, the contract touched its highest since Oct. 3, 2018 at USD86.71.
US West Texas Intermediate crude was up 58 cents, or 0.7%, at USD84.40 a barrel, after hitting USD84.78, the highest since Nov. 10, 2021, earlier in the session.
The gains followed a rally last week when Brent rose more than 5% and WTI climbed over 6%.
Frantic oil buying, driven by supply outages and signs the Omicron variant will not be as disruptive as feared for fuel demand, has pushed some crude grades to multi-year highs, suggesting the rally in Brent futures could be sustained a while longer, traders said.
"The bullish sentiment is continuing as (producer group) OPEC+ is not providing enough supply to meet strong global demand," said Toshitaka Tazawa, an analyst at Fujitomi Securities Co Ltd.
"If (investment) funds increase allocation weight for crude, prices could reach their highs of 2014," he said.
The Organization of the Petroleum Exporting Countries, Russia and their allies, together known as OPEC+, are gradually relaxing output cuts implemented when demand collapsed in 2020. But many smaller producers cannot raise supply and others have been wary of pumping too much oil in case of renewed COVID-19 setbacks.
"What comes in view next is the summer demand bump, especially in Europe and the US, which could be bigger than last year's, if the growing hope around the Omicron finally turning COVID from pandemic to endemic proves right," said Vandana Hari, energy analyst at Vanda Insights.
Festering geopolitical threats to supply are also supporting bullish sentiment, Hari said.
US officials voiced fears on Friday that Russia was preparing to attack Ukraine if diplomacy failed. Russia, which has amassed 100,000 troops on Ukraine's border, released pictures of its forces on the move.
The US government has held talks with several international energy companies on contingency plans for supplying natural gas to Europe if conflict between Russia and Ukraine disrupts Russian supplies, two US officials and two industry sources told Reuters on Friday.
US crude oil stockpiles, meanwhile, fell more than expected to their lowest since October 2018, but gasoline inventories surged due to weak demand, the Energy Information Administration said on Wednesday.
As MRC informed before, US commercial crude stocks fell 3.48 million barrels to 413.96 million barrels in the week ended Sept. 17, to more than 8% below the five-year average, Energy Information Administration data showed. Stocks were last lower Oct. 5, 2018.
We remind that in late August, 2021, US crude stocks dropped sharply while petroleum products supplied by refiners hit an all-time record despite the rise in coronavirus cases nationwide, the Energy Information Administration said. Crude inventories fell by 7.2 million barrels in the week to Aug. 27 to 425.4 million barrels, compared with analysts' expectations in a Reuters poll for a 3.1 million-barrel drop. Product supplied by refineries, a measure of demand, rose to 22.8 million barrels per day in the most recent week. That's a one-week record, and signals strength in consumption for diesel, gasoline and other fuels by consumers and exporters.
We also remind that US crude oil production was expected to fall by 160,000 barrels per day (bpd) in 2021 to 11.12 million bpd, EIA said in a monthly report earlier last year, a smaller decline than its previous forecast for a drop of 210,000 bpd.