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Oil futures rose Monday, on track to cap a sharp January rally that’s lifted the U.S. benchmark by around 15% as traders continue to track the threat of a Russian invasion of Ukraine and await a meeting this week of major oil producers.
“Mounting concerns over Russia-Ukraine tensions continued to boost supply risk premia for energy products,” said Warren Patterson, head of commodities strategy at ING, in a note.
West Texas Intermediate crude for March delivery
CL00,
CLH22,
rose 44 cents, or 0.5%, to $87.26 a barrel on the New York Mercantile Exchange, with the U.S. benchmark on track for a 16% monthly rise.
March Brent crude
BRNH22,
the global benchmark, was up $1.03, or 1.1%, at $91.06 a barrel on ICE Futures Europe. April Brent
BRN00,
BRNJ22,
the most-actively traded contract, was up 54 cents, or 0.6%, at $89.06 a barrel, headed for a 14.5% monthly advance. Brent and WTI last week both traded at levels last seen in October 2014.
Russia has amassed around 100,000 troops near Ukraine border and taken other actions that have sparked fears an invasion of the neighboring country may be imminent. The U.S. and its allies have threatened searing sanctions against Moscow in the event of an attack. Russia has insisted that NATO rule out membership for Ukraine and has made other security demands that the U.S. and its allies have deemed nonstarters.
A United Nations Security Council meeting on Monday will offer “one more opportunity to find a diplomatic way out for the Russians,” said Linda Thomas-Greenfield, U.S. ambassador to the U.N., in a Sunday television interview.
The Organization of the Petroleum Exporting Countries and its Russian-led allies, a group known as OPEC+, will meet this week. OPEC+ has so far stuck to a timetable that has seen it add 400,000 barrels a day to output in monthly increments, though members have struggled to meet the increased quotas.
“The only short-term solution for balancing the supply-short oil market will therefore need to come from OPEC+, and steered by Saudi Arabia, the producer with the largest spare capacity,” said Louise Dickson, senior oil markets analyst at Rystad Energy, in a note.
“The group’s top producer could decide to add more ‘voluntary’ barrels outside the framework of the agreement to ease oil prices, a similar, but mirrored action from January 2021 when it surprised the market with an additional 1 million [barrel a day] cut,” Dickson said. “In short, Saudi Arabia can quickly and easily drum up spare capacity if it decides it is beneficial.”
