Brent oil traded near the highest intraday level since 2014 as the market tightened and concerns about the impact of Omicron eased.
Futures in London held at about $86 a barrel after a fourth weekly advance on Friday, with gains tempered by signs of slowing Chinese economic growth. High prices are justified and futures could rise even further, according to trader Vitol Group. Oil’s market structure has firmed in a bullish backwardation pattern, indicating growing supply tightness.
Oil has rallied more than 10% so far this year, in part due to outages in Opec+ producers including Libya. The International Energy Agency said last week that global consumption has turned out to be stronger than expected, while the physical market is booming as buyers look beyond the spread of Omicron.
“There is a genuine belief that physical demand will keep exceeding supply,” said Tamas Varga, an analyst at brokers PVM Oil Associates Ltd. “On the demand side, the cold winter in North America is one of the major factors. Mild Omicron symptoms and hopes that the rapid rise in cases is about to abate also contributed to the strength.”
The Covid-Zero policy employed by China will probably ensure that there’s no Omicron outbreak big enough to significantly diminish the use of oil products there, Mike Muller, Vitol’s head of Asia, said Sunday during a webinar hosted by Dubai-based consultants Gulf Intelligence. China’s central bank, meanwhile, cut its key interest rate for the first time in almost two years to help bolster an economy that’s lost momentum because of a property slump and repeated virus outbreaks. Official data on Monday showed gross domestic product rose 4% last quarter from a year earlier, the weakest since early 2020.
Related Story