(Bloomberg) – Oil rose as leading market participants said they expect global demand to continue on the strong recovery from the pandemic and escalating tensions in Ukraine.
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West Texas Intermediate traded near $92 a barrel, and Brent crude rose again above $95, as Saudi Aramco, the world’s largest producer, said it was seeing signs of rising demand, especially in Asia. The CEO of Vitol Group, the world’s largest independent oil trader, said in an interview with Bloomberg TV that prices could exceed $100 a barrel for a long time.
“Demand will rise in the second half” and exceed 100 million barrels per day if travel continues to return to normal, Vitol Group CEO Russell Hardy told Bloomberg TV. “Eventually our spare capacity will run out.”
Oil traders are closely following the escalating tensions between Russia and the West over Ukraine. Prices extended gains after Russian President Vladimir Putin said he would decide later Monday whether to formally recognize separatists in eastern Ukraine, a move that would likely torpedo European-mediated peace talks. The Kremlin has repeatedly denied it intends to attack Ukraine.
The Kremlin said there were no “concrete plans” for a summit between US President Joe Biden and Putin, raising questions about the fate of a French proposal that appeared to offer new optimism to avert a possible attack on Ukraine.
See also: Biden agrees to hold Putin summit if there is no invasion, says US
The United States told the Allies that any Russian invasion would result in cities outside the capital, Kiev, being targeted. Moscow, which has repeatedly denied it was planning an invasion, said over the weekend that its forces would remain in Belarus indefinitely.
“The concern is that if tension in Eastern Europe escalates more than some of that supply could be intentionally disrupted or driven by political divisions,” said Giovanni Stunovo, commodities analyst at UBS Group AG, affecting not only energy but other commodities. “I expect the market to continue to act in a sensitive manner.”
Adding to the bullish sentiment, many of the largest OPEC+ oil producers want the group to continue with its strategy and add another 400,000 barrels per day of crude oil to the market in April, according to people familiar with the matter. This comes despite calls for OPEC+ to raise production faster amid tight supplies.
Trading volumes were lower than normal levels on Monday as many market participants were away due to the President’s Day holiday in the US
Natural gas prices fell sharply on the back of the prospects for the Biden-Putin summit.
Iranian Foreign Ministry spokesman Saeed Khatibzadeh said at a press conference that oil investors are also following negotiations to revive the 2015 Iran nuclear deal, which has made some progress. Although the remaining issues are the most difficult, he added.
In a sign of the bullishness of the crude oil market, the nearby contracts of WTI and Brent crude are charging significant premiums to those overseas, indicating that traders are demanding barrels at the moment. In Asia, refiners are seeking to increase their operating rates to take advantage of good profit margins.
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