Oil continues to trade higher as geopolitical tensions grow

Demand for crude is likely to increase as economies recover, analysts say

Oil prices have rallied more than 18 per cent this year, while crude gained more than 67 per cent in the past year. AFP

Oil prices continued to trade higher amid growing concerns about supply disruptions as a result of intensifying geopolitical tensions in eastern Europe and falling oil inventories due to robust demand.

Brent was down 1.05 per cent to $92.29 per barrel at 1.51pm UAE time on Monday. The global benchmark for two thirds of the world's oil touched a seven-year high of $94 per barrel in early trading on Monday.

Meanwhile, West Texas Intermediate, the gauge that tracks US crude, was trading at $90.93 per barrel.

“Oil prices remain on an upward trajectory with both WTI and Brent futures gaining for the seventh week in a row last week,” said Daniel Richards, Mena economist at Emirates NBD.

“Brent settled at $93.27 per barrel, up 3.6 per cent, while WTI added more than 6.3 per cent to settle at $92.31 per barrel.”

Crude has remained buoyant in the past few weeks as geopolitical tensions continue to rise in eastern Europe.

Russia has moved at least 70 per cent of the military hardware and troops it needs to launch a full-scale invasion of Ukraine, US officials said last week. Russian President Vladimir Putin could order an invasion imminently, US National Security Adviser Jake Sullivan said on Sunday.

Russia is one of the world's top oil producers and an integral part of the Opec+ alliance that is co-ordinating the supply of oil in global markets.

“Demand for oil is likely to rise as economies continue to expand, and geopolitical tensions in the Middle East and Ukraine may also drag oil supply down in coming months, making the case for $100 per barrel a realistic scenario for 2022,” said Naeem Aslam, chief market analyst at Ava Trade.

Oil prices have rallied more than 18 per cent this year, while crude gained more than 67 per cent in the past year.

The inability of some Opec member countries to quickly increase production is also supporting oil prices.

“Oil's outlook remains bullish....in light of robust global demand, falling inventories globally, and persisting supply constraints,” Han Tan, chief market analyst at Exinity Group told The National. "Any escalation in tensions is bound to spur further advances in crude prices.”

The Opec+ group has decided to add 400,000 barrels of oil per day to the market in March as demand continues to pick up amid the global economic recovery.