New Telegraph

Brent crude hits $90.3 a barrel, rekindles Nigeria’s hope

Brent crude, at the weekend, rose to $90.3 per barrel of crude oil, the highest level since October 2014, when crude oil was sold $91.70 a barrel. This happened as geo-political turmoil exacerberated concerns over tight energy supply in the market.

 

The rise in crude oil price indicated the six straight weekly gain and more than sevenyear peak in recent times. With this, a measure of hope has been rekindled in Nigeria, which depends on oil exports to sustain its economy. Brent futures rose 69 cents to settle at $90.03 a barrel, the highest level since October 2014 when it recorded $91.70 a barrel.

Similarly, U.S. crude closed 21 cents higher at $86.82 per barrel, after hitting a seven-year peak of $88.84 during the session.

Tight oil supplies pushed the six-month market structure for Brent into steep backwardation of $6.92 a barrel, the widest since 2013. Backwardation exists when contracts for nearterm delivery of oil are priced higher than those for later months, encouraging traders to release oil from storage to sell it promptly.

Meanwhile, major producers in the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, collectively known as OPEC+, have struggled to raise their production levels.

The market also reacted to attacks on United Arab Emirates by Yemen’s Houthi group. An analyst from UBS, Giovanni Staunnovo, said that prices of crude oil drew support from concerns over a possible military conflict in Ukraine that could disrupt energy markets, especially natural gas supply to Europe.

 

“So far, there has been no supply disruptions in Eastern Europe. So, guess the risk premium related to those tensions is not so high,” UBS analyst Giovanni Staunovo said. In a related development, the Director in charge of Commodity Research at ClipperData, Matt Smith, said that a relatively softer U.S. rhetoric on Russia may have led to “some of the air being let out of the tires on this crude rally.”

 

According to him, prices of crude oil would continue to get swept off, as political uncertainty increases globally. Recall that OPEC+ in its interview with Reuters, is likely to stick with a planned rise in its oil output target for March.

“This is because some key producers in the OPEC+ group, including Russia, continue to struggle to meet their output quotas,” Marshall Steeve, energy markets analyst at IHS Markit has said.

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