Oil shows the best week since mid-December amid unrest in Kazakhstan and problems in Libya. In the United States and Canada, some wells froze. Oil prices rose on Friday, reaching the largest weekly increase since mid-December, helped by concerns about supply amid escalating unrest in Kazakhstan and power outages in Libya. Brent crude futures rose 55 cents, or 0.7%, to $82.56 per barrel 1.5% in the previous session.
WTI crude futures rose 57 cents, or 0.8%, to $80.02 per barrel, up 2.1% in the previous session. Brent and WTI crude oil prices rose by more than 6% in the first week of the year, while prices reached their highest since the end of November, as concerns about supply overcame fears that the rapid spread of the omicron coronavirus variant could hurt demand. “The rise in oil prices mainly reflects market concerns, as popular unrest is growing in Kazakhstan, and the political situation in Libya continues to worsen and limits oil production,” said Louise Dixon, an analyst at Rystad Energy, in comments by email.
After several days of unrest in Kazakhstan, during which the government declared a state of emergency, Russia sent paratroopers to stabilize the situation on Thursday. The protests began in the oil-rich western regions of Kazakhstan after state restrictions on petroleum gas prices for cars – butane and propane – were lifted on the first day of the New Year. Meanwhile, the increase in supply from the Organization of the Petroleum Exporting Countries, Russia, and its allies, collectively called OPEC, has not kept pace with the growth in demand.
OPEC production in December increased by 70,000 barrels per day compared to the previous month, compared with an increase of 253,000 barrels per day allowed under the OPEC+ supply agreement, which restored production that was cut in 2020 when demand fell to COVID-19 restrictions. Russia also failed to increase production last month. In addition, production in Libya has fallen to 729,000 barrels per day, down from a peak of 1.3 million barrels per day last year, partly due to pipeline maintenance work.
While the omicron option is rapidly gaining strength, concerns from the demand side are decreasing amid growing evidence that it is less severe than previous options. Analysts at Fitch Solutions note that governments tend to apply less stringent deterrence measures in response to it. Wang Xiao, a lead researcher at Guotai Junan Futures, said that low oil reserves in Europe and America also support the bullish sentiment of market participants.
But in general, the rise in prices raises concerns about inflation, which may affect the further growth of oil prices.” The operator of Kazakhstan’s Tengiz field, known as TCO, declined to provide additional information on the amount of the production adjustment but said that production operations were continuing. TCO is a joint venture led by Chevron Corp., which pumps about a third of the OPEC country’s oil.
Freezing wells in Canada and the northern United States also disrupted standard oil flows this week. they have coincided with a decline in U.S. crude oil inventories, declining every week since November. “Oil has been rising in recent weeks as financial markets have rightly dismissed concerns about omicron as a temporary phenomenon,” says Jeffrey Halley, senior market analyst at Oanda Asia Pacific Pte Ltd. “This week, this momentum accelerated despite an increase in OPEC production, and now we have disruptions in Kazakhstan and Libya, adding to optimism.”
The oil market structure has become more bullish due to an increase in backwardation, signaling a growing supply shortage. On the ICE Futures Europe exchange, March Brent futures were 0.6% higher at $82.51 per barrel. The backwardation of the Brent brand in short-term contracts rose to 74 cents compared to 43 cents a week earlier.