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U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading sharply higher late in the session on Friday, bolstered by supply constraints and geopolitical concerns over Russia/Ukraine relations.
Crude oil is set to post its fourth straight weekly gain despite reports that China is poised to release crude reserves around the Lunar New Year later this month.
At 19:19 GMT, March WTI crude oil futures are trading $83.35, up $1.73 or +2.12% and March Brent crude oil is at $86.04, up $1.57 or +1.86%. The United States Oil Fund ETF (USO) is at $59.87, up $1.60 or +2.75%.
Bullish Global Supply/Demand Situation
Several banks have forecast oil prices of $100 a barrel this year, with demand expected to outstrip supply, not least as capacity constraints among OPEC+ countries come into focus, Reuters said.
Oil prices that rallied 50% in 2021 will power further ahead this year, some analysts predict, saying a lack of production capacity and limited investment in the sector could lift crude to $90 or even above $100 a barrel.
Though the Omicron coronavirus variant has pushed COVID-19 cases far above peaks hit last year, analysts say oil prices will be supported by the reluctance of many governments to restore the strict restrictions that hammered the global economy when the pandemic took hold in 2020.
Furthermore, OPEC and its allies are gradually relaxing the output cuts implemented when demand collapsed in 2020. However, many smaller producers can’t raise supply and others have been wary of pumping too much oil in case of renewed COVID-19 setbacks.
Reuters Exclusive: China to Release Crude from Strategic Stockpiles
Sources told Reuters that China will release crude oil from its national strategic stockpiles around the Lunar New Year holidays that start on February 1 as part of a plan coordinated by the United States with other major consumers to reduce global prices.
“China agreed to release a relatively bigger amount if oil is above $85 a barrel, and a smaller volume if oil stays near the $75 level,” said one source, without elaborating.
The release of crude stocks by China will occur around the Lunar New Year, the sources said. China will be closed for the biggest annual holiday from January 31 to February 6.
Crude oil traders were unfazed by the news that China will release crude from its strategic reserve because they believe the demand is strong enough to overcome the extra supply.
Furthermore, when the United States, China and other allies released oil before, the effect didn’t last very long and now crude is trading over its October 26 tops.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire