Oil at seven-year high as Ukraine crisis overshadows Fed
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[January 27, 2022] By
Ahmad Ghaddar
LONDON (Reuters) -Oil extended gains to
seven-year highs above $90 a barrel on Thursday as the Ukraine crisis
outweighed signs that the U.S. Federal Reserve will tighten monetary
policy.
Brent crude futures were up 89 cents, or 1%, at $90.85 a barrel by 1217
GMT. U.S. West Texas Intermediate (WTI) crude futures were up 87 cents,
or 1%, at $88.22.
Crude prices had surged on Wednesday, with Brent climbing above $90 a
barrel for the first time in seven years amid tensions between Russia
and the West. Russia, the world's second-largest oil producer, and the
West have been at loggerheads over Ukraine, fanning fears of disruption
of energy supplies to Europe.
Both contracts were lower in early trading after the U.S. Federal
Reserve said on Wednesday that it is likely to raise interest rates in
March and plans to end its bond purchases that month in its battle to
tame inflation.
The U.S. dollar climbed after the announcement, making oil more
expensive for buyers using other currencies.
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"A more pronounced price slide is being prevented by the Ukraine crisis,
as there are still concerns that Russian oil and gas deliveries could be
hampered in the event of a military escalation," Commerzbank said after
the morning price dip.
Market attention is also turning to a Feb. 2 meeting of the Organization
of the Petroleum Exporting Countries (OPEC) and allies led by Russia, a
group known as OPEC+.
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The sun is seen behind a crude oil pump jack in the Permian Basin in
Loving County, Texas, U.S., November 22, 2019. REUTERS/Angus
Mordant/File Photo
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The group is likely to stick with a planned increase to its oil output target
for March, several OPEC+ sources told Reuters.
OPEC+ has raised its output target each month since August by 400,000 barrels
per day (bpd) as it unwinds record production cuts made in 2020.
However, the group has faced capacity constraints that have prevented some
members from producing at their quota levels.
Still, an increase in crude oil and gasoline inventories in the United States
alleviated some of the concerns about supply.
Crude inventories rose by 2.4 million barrels last week, the Energy Information
Administration (EIA) said on Wednesday. That compared with expectations of a
decline of 728,000 barrels in a Reuters poll of analysts.
Gasoline stockpiles rose by 1.3 million barrels, the most since February 2021.
(Reporting by Ahmad GhaddarAdditional reporting by Emily Chow in BeijingEditing
by David Goodman)
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