Tight Supply Bolsters Oil Price Above $78 a Barrel

Tight global crude oil supply and hopes of a further demand recovery in the new year bolstered global oil price above $78 a barrel on Monday even with OPEC+ planning to increase supply on Tuesday.

Brent crude oil, against which Nigerian oil is priced, appreciated by 39 cents or 0.5 percent to $78.17 a barrel at 5:03 pm Nigerian time, while the U.S West Texas Intermediate (WTI) crude slipped by 25 cents or 0.3 percent to $74.96 per barrel.

OPEC+ will meet on Tuesday to agree to increase crude oil production despite the rising Omicron cases and over 4,000 cancelled flights as at Sunday.

“Infection rates are on the rise globally, restrictions are being introduced in several countries, the air travel sector, amongst others, is suffering, yet investors’ optimism is tangible,” said Tamas Varga of oil broker PVM.

“In a nutshell, 2021 demonstrated that the war against the coronavirus is a winnable one although the path to victory is paved with unexpected twists and turns.”

Some experts partially attributed the increase in global oil prices to Libya’s outage. An estimated 200,000 barrels per day will be cut off the global market for a week due to pipeline maintenance.

In 2021, Brent crude oil rose by 50 percent, spurred by the global recovery from the COVID-19 pandemic and OPEC+ supply cuts, even as infections reached record highs worldwide.

“Crude and oil product prices should benefit from oil demand moving above 2019 levels,” said a report from UBS analysts including Giovanni Staunovo. “We expect Brent to rise into a $80–90 range in 2022.”