The oil market started the week bullish as prices rose to a seven-year high when it hits $88.4bp on Tuesday after drone attacks, Monday near an oil depot in the United Arab Emirates (UAE) by Yemen’s Houthi rebels stoked fears across the region. Brent crude oil rose 1.9 per cent to a high of $88.13 a barrel with the West Texas Intermediate (WTI) trading at $86.9pb, the highest level since October 2014 when oil topped $115. With this surge, some analysts are of the opinion that the crude benchmarks could trade at more than $100 a barrel this year unless the supply is increased.
The US has, however, called on the world’s leading oil producers, represented by OPEC, to increase production faster to help control inflation as the US consumer price growth increased 7 per cent year on year in December, the fastest pace since 1982.
OPEC and its allies have so far stuck to a plan agreed in July to replace output cut at the start of the pandemic gradually, by just 400,000 barrels a day each month. The strategy has helped oil prices track higher since August but not all members of the Opec+ group have been able to hit their monthly targets raising fears that there is limited spare production capacity in the market. Some of the members include Nigeria and Russia.
Nigeria despite having one of the lowest targets of 2 million barrels per day and 1.67 million barrels per day for December was only able to produce only 1.44 million barrels per day in December and 1.49 million barrels per day in November. Production figures released by Opec on Tuesday showed monthly output increased in December in Angola, Saudi Arabia, Iraq and the United Arab Emirates but declined in Nigeria and Libya.
Such capacity concerns have been compounded since the start of the year by more supply disruption in Libya and a drone attack on Monday near an oil depot in the UAE by Yemen’s Houthi rebels, which has provoked fears of renewed risks to production in the Gulf.
