Oil prices test seven-year highs

Libyan total output returns above 1.2 million bpd following recent blockade

Oil well                                 
Spot Brent and US Crude trade flat on UK Monday afternoon – Photo:Shutterstock
                                

Oil prices traded within touching distance of seven-year highs on Monday, bolstered by the continued failure of global supply to meet rising demand. 

Brent crude futures traded above $86.60 per barrel for the first time since 2018 in the UK morning, having started 2022 below $79.60. The leading international benchmark gave up some momentum in the afternoon, trading up 0.3% at $86.38 per barrel by 16:30 (GMT). 

West Texas Intermediate futures likewise rose to four-year highs, reaching $84.59 per barrel. The US crude benchmark also lost some momentum later on in the day to trade up by 0.3% at $84.09 per barrel, having started the year at $75.21 per barrel.

Powell & OPEC+

US Federal Reserve chair Jerome Powell’s comments last week that the Omicron variant of Covid-19 would have a smaller impact on the global economy than initially expected has propelled the oil price higher. 

The main obstacle to lower oil prices in 2021 was the Organisation of the Petroleum Exporting Countries (OPEC+) and its allies, namely, Russia. However, the commodity has continued to rise in price despite the consortium’s recent about turn and commitment to increase supply by 400,000 barrels in February. 

The announcement was moderately undercut by growing anxiety that a number of OPEC+ members would not be able to keep up with the new output targets.

Libya

Last week, Libyan production fell to 900,000 barrels per day due to a blockade of the western oilfields in the North African nation. According to Libya’s National Oil Corporation, the country’s national output has since risen back above 1.2 million barrels as the blockade has abated. 

Spot Brent and US crude both traded flat at $85.95 per barrel and $83.75 per barrel, respectively.

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