Crude oil price outlook: here’s what to expect in the new week
- Crude oil price soared to fresh 2014 highs on Friday amid heightened concerns over Russian attack on Ukraine.
- Such attacks would disrupt oil supply at a time when the market is already tight.
- OPEC's monthly report painted a picture of dwindling inventories and rising demand.
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Crude oil price surged to a fresh 2014 high on Friday amid the heightened geopolitical tensions in eastern Europe. Brent futures- the benchmark for global oil- extended its previous gains to trade at an intraday high of $95.63. Granted, it pulled back to end the week at $94.94. At the same time, WTI futures – the benchmark for US oil – closed Friday’s session at $93.88 after rising to $94.64 earlier in the day; its highest level since September 2014.
In the recent past, geopolitics has been one the bullish drivers in the energy market. Concerns that Russia may attack Ukraine have had investors worried that the subsequent disruptions of oil supply will impact an already tight market.
On the one hand, Russia’s President – Vladimir Putin- has on multiple occasions insisted that he does not intend to invade Ukraine. In fact, a few days ago, French President Emmanuel Macron stated that Putin had assured him that Russia will not escalate the existing Ukraine Crisis.
However, recent events have painted a different image; an aspect that has yielded into a key tailwind for crude oil price. On Friday, US officials warned that Russia may attack Ukraine in coming days; probably via missile or air strikes. It has surrounded Ukraine from three sides with heavy weaponry and 130,000 troops.
Investors’ concerns have been heightened by the unproductive call between President Biden and President Putin on Saturday. In the new week, geopolitics is expected to be a key bullish driver of crude oil price.
In the ensuing sessions, the ongoing imbalance between oil demand and supply will be worth looking out for. In its monthly report, the Organization of Petroleum Exporting Countries (OPEC) indicated that the stockpiles of key consuming nations were on a decline.
According to the alliance, the wealthy countries that constitute the Organization for Economic Corporation and Development recorded a decline in commercial inventories by 2.72 billion barrels in January. In comparison, the stockpiles dropped by 31.2 million barrels in December.
On the demand side, OPEC expects global oil demand to continue rising as most economies continue to strengthen. It left its forecast for oil demand growth unchanged at 4.2 million bpd. As part of its founding arguments, it’s stated that higher interest rates and inflationary pressures “require close monitoring”.
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