Oil pipelines recovered, API inventories increased, and cloth oil fell sharply after breaking through the 89 mark

On Wednesday (January 19), the U.S. oil February contract rose 0.87% to close at $86.96 a barrel. With tight supply, spreads on crude oil futures recently delivered by the United States soared, quickly rising above $1/barrel. The International Energy Agency (IEA) said that the market supply looks more tight than previously thought, and demand is proving to remain resilient in the case of the omicron epidemic, providing support for oil prices to continue to rise in recent days.

Before the February contract expired on Thursday, the spread between the February and March U.S. oil contracts briefly broke through $1 a barrel, its strongest since mid-November last year. According to the data, the open position for the $1 calendar spread option has climbed to nearly 7,000 lots. Traders said the dollars that bought $1 calendar spread options in recent weeks could keep prices at this level to cash out, providing further support. Spot supply has also tightened in recent weeks as oil production growth in December and January was lower than traders expected.

Earlier data released by the American Petroleum Association (API) showed that in the week ended January 14, U.S. crude oil inventories increased by 1.404 million barrels, gasoline inventories increased by 3.463 million barrels, refined oil inventories decreased by 1.496 million barrels, and Cushing crude oil inventories decreased by 1.496 million barrels. After the data was released, U.S. oil fell nearly $0.50.

A key pipeline from Iraq to Turkey was suspended by an explosion, and oil prices hit their highest in more than seven years. A pipeline from Kirkuk to Ceyhan, which carries crude oil from northern Iraq to the Turkish port of Ceyhan, has resumed. Iraq is the second largest producer of oil from the Organization of the Petroleum Exporting Countries (OPEC). A senior security source said the explosion that sparked a pipeline fire in Turkey's southeastern province was caused by a fall of a cable tower, not an attack.

Concerns about supply have increased this week after Yemen's Houthi militants attacked the Uae, OPEC's third-largest oil producer, and Russia, the world's second-largest oil producer, amassed a large number of troops near the Ukrainian border, raising fears of its invasion of Ukraine.

Craig Erlam, senior market analyst at OANDA, said: "While $90 a barrel may trigger some profit-taking and a slight cooling of prices, it suggests they will not see a respite and we may soon see oil prices reach $100 a barrel." ”

The International Energy Agency (IEA) said in its monthly oil report that oil supply will soon exceed demand as some oil-producing countries will soon exceed demand as production will be at or above record highs, and demand remains strong despite the spread of the Omicron variant virus. This surge in COVID-19 cases has had a smaller impact on oil consumption. The easing of lockdown measures means that the flow of people remains strong, which has led the IEA to raise its oil demand forecast for last year and 2022 by 200,000 bpd.

On the supply side, the IEA said a steady increase in supply could lead to a significant oversupply in the first quarter of 2022 and beyond, as the U.S., Canada and Brazil are expected to produce record oil this year, while Saudi Arabia and Russia are likely to break records. However, the IEA warned that any reduction in supply could cause the oil market to fluctuate in 2022, with commercial oil and fuel inventories in OECD member countries at their lowest level in seven years.

Rebecca Babin, senior energy trader at CIBC Private Wealth Management, said: "The market has already digested the possibility of a tightening supply in 2022 and the IEA and other institutions have simply caught up with market expectations. Oil prices are likely to continue to rise, and in a tight supply market, the risk of events can lead to a sharp rise in prices."

This article originated from Huitong Network