Oil was poised for a third weekly gain as the market tightened due to supply constraints across OPEC+ members following civil unrest.
Futures in New York rose to trade near $80 a barrel after climbing about 6% over the past four sessions. Kazakhstan’s biggest oil producer has altered output at the giant Tengiz field following protests in the country, while Libyan production has also been crimped.
Oil’s market structure has firmed in a bullish backwardation structure, signaling growing supply tightness.
The OPEC+ alliance this week stuck with a scheduled output boost of 400,000 barrels a day for February, but the group is unlikely to meet that threshold as some members struggle to achieve their targets. Output in Libya has declined amid militia unrest, while Russia also failed to boost output last month.
“Oil has rallied in recent weeks as financial markets have dismissed omicron, rightly or wrongly, as a temporary aberration,” Jeffrey Halley, senior market analyst at Oanda Asia Pacific Pte Ltd. “That momentum accelerated this week, despite OPEC+ hiking production, and now we have Kazakhstan and Libya disruptions adding to the bullishness.”
- West Texas Intermediate for February delivery rose 0.5% to $79.89 a barrel on the New York Mercantile Exchange at 7:45 a.m. London time after climbing 2.1% on Thursday.
Prices are up 6.2% this week.
- Brent for March settlement was 0.5% higher at $82.41 a barrel on the ICE Futures Europe exchange.
- Backwardation in Brent’s prompt time spread was at 73 cents, compared with 43 cents a week earlier.
The operator of Kazakhstan’s Tengiz field, known as TCO, declined to provide further details on the size of the output adjustment, but it said that production operations were continuing. TCO is a joint venture led by Chevron Corp that pumps about a third of the OPEC+ nation’s oil.
A deep freeze in Canada and the northern US has also disrupted oil flows this week. That’s coincided with shrinking American crude inventories, which have declined every week since November.