Oil pauses, but outlook for prices remains bullish

London — Oil traded lower on Thursday as investors took profits after a recent price rally, but strong demand and short-term supply disruptions continue to support prices close to their highest since 2014.

Brent crude futures were down 39c, or 0.4%, at $88.05 a barrel by 10.06am GMT after dropping more than $1 in earlier trade. The global benchmark rose to $89.17 on Wednesday, its highest since October 2014.

February deliveries of West Texas Intermediate were down 29c, or 0.3%, at $86.67 dropping almost $1 earlier. The contract, which expires on Thursday, climbed to $87.91 on Wednesday.

The more active March WTI contract was down 15c, or 0.1%, at $85.65 a barrel.

“The voices of those forecasting $100 per barrel oil are getting louder by the day,” said Tamas Varga at oil brokerage PVM.

Supply concerns have mounted this week after a fire on Tuesday temporarily halted flows through an oil pipeline running from Kirkuk in Iraq to the Turkish port of Ceyhan.

An attack by Yemen’s Houthis on the United Arab Emirates, Opec’s third-largest producer, heightened geopolitical risks.

The market is also supported by supply shortfalls from the Opec+ producer group comprising Opec and allies led by Russia. The International Energy Agency (IEA) on Wednesday said the group produced about 800,000 barrels a day less than its production targets in December.

The IEA said that while the oil market could be in a significant surplus in the first quarter of this year, inventories are likely to be well below pre-pandemic levels. The agency also upgraded its 2022 demand forecast.

A rise in US oil inventories last week weighed on prices. Crude stocks rose by 1.4-million barrels last week, while petroleum inventories rose by 3.5-million barrels and distillate stocks fell by 1.2-million barrels, according to market sources citing American Petroleum Institute figures on Wednesday.

Reuters