Oil Prices Climb More Than 1% to 7-Year Highs

A flag with the OPEC logo is seen during a meeting. Reuters
A flag with the OPEC logo is seen during a meeting. Reuters
TT

Oil Prices Climb More Than 1% to 7-Year Highs

A flag with the OPEC logo is seen during a meeting. Reuters
A flag with the OPEC logo is seen during a meeting. Reuters

Oil prices on Monday hit their highest in more than seven years on fears that a possible invasion of Ukraine by Russia could trigger US and European sanctions that would disrupt exports from the world's top producer in an already tight market.

Brent crude futures was at $95.61 a barrel by 0506 GMT, up $1.17, or 1.2%, after earlier hitting a peak of $96.16, the highest since October 2014. U.S. West Texas Intermediate (WTI) crude rose $1.41, or 1.5%, to $94.51 a barrel, hovering near a session-high of $94.94, the loftiest since September 2014.

Comments from the United States about an imminent attack by Russia on Ukraine have rattled global financial markets.

Russia could invade Ukraine at any time and might create a surprise pretext for an attack, the United States said on Sunday.

"If ... troop movement happens, Brent crude won't have any trouble rallying above the $100 level," OANDA analyst Edward Moya said in a note.

"Oil prices will remain extremely volatile and sensitive to incremental updates regarding the Ukraine situation."

The tensions come as the Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+, struggle to ramp up output despite monthly pledges to increase production by 400,000 barrels per day (bpd) until March, Reuters reported.

The International Energy Agency said the gap between OPEC+ output and its target widened to 900,000 bpd in January, while JP Morgan said the gap for OPEC alone was at 1.2 million bpd.

"We note signs of strain across the group: seven members of OPEC-10 failed to meet quota increases in the month, with the largest shortfall exhibited by Iraq," JP Morgan analysts said in a Feb. 11 note.

The bank added that a super-cycle is in full swing with "oil prices likely to overshoot to $125 a barrel on widening spare capacity risk premium".

CMC Markets analyst Tina Teng said spare supply is limited and demand for oil has outpaced production growth, as economies bounce back from the worst of the coronavirus pandemic.

"It would not take long for prices to spike higher, though global leaders are rushing to help defuse the growing tension," she added.

Investors are also watching talks between the United States and Iran to revive the 2015 nuclear deal.

However, a senior Iranian security official said on Monday that progress in talks was becoming "more difficult".

In the United States, the robust oil prices are encouraging energy firms to ramp up output as they added the most oil rigs in four years last week, energy services firm Baker Hughes Co said on Friday.



OPEC Again Cuts 2024, 2025 Oil Demand Growth Forecasts

The OPEC logo. Reuters
The OPEC logo. Reuters
TT

OPEC Again Cuts 2024, 2025 Oil Demand Growth Forecasts

The OPEC logo. Reuters
The OPEC logo. Reuters

OPEC cut its forecast for global oil demand growth this year and next on Tuesday, highlighting weakness in China, India and other regions, marking the producer group's fourth consecutive downward revision in the 2024 outlook.

The weaker outlook highlights the challenge facing OPEC+, which comprises the Organization of the Petroleum Exporting Countries and allies such as Russia, which earlier this month postponed a plan to start raising output in December against a backdrop of falling prices.

In a monthly report on Tuesday, OPEC said world oil demand would rise by 1.82 million barrels per day in 2024, down from growth of 1.93 million bpd forecast last month. Until August, OPEC had kept the outlook unchanged since its first forecast in July 2023.

In the report, OPEC also cut its 2025 global demand growth estimate to 1.54 million bpd from 1.64 million bpd, Reuters.

China accounted for the bulk of the 2024 downgrade. OPEC trimmed its Chinese growth forecast to 450,000 bpd from 580,000 bpd and said diesel use in September fell year-on-year for a seventh consecutive month.

"Diesel has been under pressure from a slowdown in construction amid weak manufacturing activity, combined with the ongoing deployment of LNG-fuelled trucks," OPEC said with reference to China.

Oil pared gains after the report was issued, with Brent crude trading below $73 a barrel.

Forecasts on the strength of demand growth in 2024 vary widely, partly due to differences over demand from China and the pace of the world's switch to cleaner fuels.

OPEC is still at the top of industry estimates and has a long way to go to match the International Energy Agency's far lower view.

The IEA, which represents industrialised countries, sees demand growth of 860,000 bpd in 2024. The agency is scheduled to update its figures on Thursday.

- OUTPUT RISES

OPEC+ has implemented a series of output cuts since late 2022 to support prices, most of which are in place until the end of 2025.

The group was to start unwinding the most recent layer of cuts of 2.2 million bpd from December but said on Nov. 3 it will delay the plan for a month, as weak demand and rising supply outside the group maintain downward pressure on the market.

OPEC's output is also rising, the report showed, with Libyan production rebounding after being cut by unrest. OPEC+ pumped 40.34 million bpd in October, up 215,000 bpd from September. Iraq cut output to 4.07 million bpd, closer to its 4 million bpd quota.

As well as Iraq, OPEC has named Russia and Kazakhstan as among the OPEC+ countries which pumped above quotas.

Russia's output edged up in October by 9,000 bpd to about 9.01 million bpd, OPEC said, slightly above its quota.