Oil nears $89 a barrel as tight supply and political tension persist

London — Oil rose towards $89 a barrel on Wednesday, within sight of a seven-year high, supported by tight supply and geopolitical tension in Europe and the Middle East that raise concerns about further disruption.

US President Joe Biden said on Tuesday he would consider personal sanctions on President Vladimir Putin if Russia invaded Ukraine. On Monday, Yemen’s Houthi movement launched a missile attack on a United Arab Emirates base.

“Anxiety over potential supply disruptions in the Middle East and Russia is providing bullish fodder for the oil market,” said Stephen Brennock of oil broker PVM.

Brent crude rose 61c, or 0.7%, to $88.81 at 9.17am GMT. On January 20 it reached $89.50, the highest since October 2014.

US West Texas Intermediate (WTI) crude was up 25c, or 0.3%, to $85.85.

“The market downside is limited due to heightened tensions between Russia and Ukraine and the threat to infrastructure in the UAE,” said Hiroyuki Kikukawa, GM of research at Nissan Securities.

Underlining a tight supply and demand balance, the weekly US inventory report from the American Petroleum Institute on Tuesday showed crude stocks fell by 872,000 barrels, market sources said.

The official Energy Information Administration (EIA) supply report is due at 3.30pm GMT.

Investors across the markets are also awaiting the update at 19000 GMT from the U.S. Federal Reserve. The Fed is expected to signal plans to raise interest rates in March as it focuses on fighting inflation.

In another key development, oil cartel and allies Opec+ will meet on meets on February 2 to consider another output increase.

Opec+ has been gradually unwinding 2020’s record output cuts, raising its monthly target by 400,000 barrels per day, though the actual increase in supply has fallen short of that as some countries struggle to raise production. 

Reuters