Oil prices rose early on Monday, poised for a 17-percent jump this month—the strongest January performance in at least 30 years—as global supply struggles to keep up with rebounding demand.
As of 7:47 a.m. EST on the last trading day of January, WTI Crude was up 0.67% at $87.40, and Brent Crude traded at $91.14, up 1.16%.
The Brent March contract expires on January 31, and April is the more active contract now. The six-month spread in Brent was in its strongest backwardation since 2013 as of trade close on Friday, signaling a tightening market with prices of near-term contracts higher than those further out in time.
The winter storm on the U.S. East Coast has pushed fuel demand higher in recent days, and geopolitical concerns also continue to support oil prices early on Monday.
The Russia-Ukraine crisis is still bringing a risk premium to energy prices amid fears of disruptions of supply in case Russia invades Ukraine, and the West imposes sanctions on Moscow.
The other geopolitical flare-up is in the Middle East, where the United Arab Emirates (UAE) reported a third attack this month, following the deadly attack with drones from the Iran-aligned Houthis two weeks ago and intercepted missiles last week.
On Monday, the UAE again said it had intercepted and destroyed a ballistic missile launched by the Houthi group, with the UAE Defense Ministry saying there were no casualties. The ministry affirmed its “full readiness to deal with any threats,” adding that it will “take all necessary measures to protect the UAE from any attacks,” Emirates news agency WAM reported.
Meanwhile, OPEC+ is meeting on Wednesday to decide production levels for March, while the market is looking at how much of the increase the alliance can actually deliver.
“Instead of the expected 400k barrels per day increase, the market is more interested in finding out how much the group can deliver after more than half of its members struggled in recent months, thereby supporting a continued rally,” Saxo Bank said on Monday.
By Tsvetana Paraskova for Oilprice.com