Abu Dhabi, 18 January 2022 (TDI): Oil prices jump nearly 25% with each barrel selling close to $90, the highest the price has been since 2014. The marked increase in prices is due to an already tight supply that was further constrained after attacks in the Middle East.
Oil has seen a general trend of increasing prices over the previous months with $69 per barrel in December 2021 to approximately $86 per barrel now.
U.S. West Texas Intermediate (WTI) crude futures jumped 1.6% or $1.36 to $85.18 a barrel while Brent crude futures saw an increase of $1.02 or 1.2%, to 87.50 a barrel. The highest these benchmarks have been recorded since 2014. Prices are projected to reach $100 a barrel.
Underinvestment and outages have prevented some producers within the Organization of the Petroleum Exporting Countries (OPEC) to produce oil products at the desired output. Furthermore, the Whitehouse has called out major oil suppliers to increase their output to control inflation.
Supply concerns have also risen amidst attacks in the United Arab Emirates. The Abu Dhabi National Oil Company has said that its goal is to provide an uninterrupted supply of oil products to local and international customers.
“The consensus is that the situation will not improve in the foreseeable future and oil demand growth together with supply constraints is inevitably leading to a tighter oil balance.” -Tamas Varga, PVM analyst.
Additionally, rising tensions amongst OPEC+ members and Russia & Ukraine have added to geopolitical price premiums.
“Even if there is no supply disruption, [those] tensions are going to push [oil] prices to potentially $100 a barrel,” -Helima Croft, RBC.
Bjarne Schieldrop, the chief commodities analyst at Swedish financial group SEB, said that producers with an excess supply like Saudi Arabia could prevent further price hikes if they wanted to.
He also added that struggling supply from Angola, Nigeria, and Libya along with high diesel and natural gas prices are natural bullish forces for light sweet crude oil, additionally, it is likely that OPEC+ members might try to counter this by breaking off their individual caps in order to prevent oil prices from going above $100.
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