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A crude oil tanker is seen at Qingdao Port, Shandong province, China on April 21 2019. Picture: REUTERS/JASON LEE
A crude oil tanker is seen at Qingdao Port, Shandong province, China on April 21 2019. Picture: REUTERS/JASON LEE

Oil touched $90 a barrel for the first time in seven years on Wednesday, supported by tight supply and rising political tensions in Russia that raised concerns about further disruption in an already-tight market.

Brent crude rose $2.02, or 2.3%, to $90.22 before midday, the first time the global benchmark has broken $90 since October 2014. US West Texas Intermediate (WTI) crude was up $2.09, or 2.4%, to $87.69.

US President Joe Biden said on Tuesday he would consider personal sanctions on President Vladimir Putin if Russia invades Ukraine. On Monday, Yemen's Houthi movement launched a missile attack on a United Arab Emirates base.

"World inventories have continued to decline as producers have struggled to restore production to pre-pandemic levels," said Andrew Lipow, president of Lipow Oil Associates in Houston. "Mix that in with geopolitical tensions between the US and Russia over Ukraine and prices have continued their march upward."

The tensions have only added to worries about the various factors contributing to an already tight market. Opec+ is having trouble meeting monthly production targets as it restores supply to markets after drastic cuts in 2020, and the US is more than a million barrels short of its record level of daily output.

At the same time, demand remains strong, suggesting that inventories may continue to decline.

"Historically, markets led higher by tightening product and crude inventories are difficult to solve absent a demand destruction event or an injection of supply. Neither appear on the horizon, currently," wrote Michael Tran, commodity strategist at RBC Capital Markets, in a note.

The Organisation of the Petroleum Exporting Countries  and allies, known as Opec+, meets on February 2 to consider another output increase.

Inventories in the US rose in the most recent week, with crude stocks up by 2.4-million barrels, against expectations for a modest decline in stocks. Fuel inventories rose to their highest levels in almost a year — a needed salve for the market.

US refined product supplied — a measure of demand — surged again, putting the four-week moving average at 21.2-million barrels per day, ahead of pre-pandemic trends. The increases have been led by consumption of distillates like diesel, as gasoline use has fallen off modestly in recent weeks.

Investors across the markets are awaiting the coming policy update from the Federal Reserve, also on Wednesday. 

Update: January 26 2018
The oil price has been updated in this story. 

Reuters  

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