Oil Prices Rally Over Supply Concerns Amid Kazakhstan Conflict
While demand concerns over omicron are starting to fade, supply concerns play a more important role in the latest oil price rally, Commerzbank said in a Friday note.
Brent crude oil has climbed to $83 per barrel, its highest level since the price slide following the first appearance of omicron in late November, while West Texas Intermediate rose above the $80 mark for the first time since mid-November, the bank noted.
Concerns about an oil demand slump have faded, now that it has become clear that omicron is a milder variant than the previous ones, making major mobility restrictions unlikely, Commerzbank said.
This is probably why Saudi Arabia has lowered its official selling prices for February by a lesser amount than expected, according to the bank.
However, the unrest in Kazakhstan may be behind the price rise as it fuels fears that domestic oil production could be hampered, Commerzbank noted.
Production at the country’s largest oilfield was adjusted yesterday, as reported by the operator, and no details of the extent of the adjustment have been released, the bank said.
Kazakhstan produces around 1.7 million barrels of crude oil per day, making it one of the larger producers within the Organization of Petroleum Exporting Countries and their allies, or OPEC+.
Meanwhile, another OPEC+ member, Libya, is experiencing a drop in oil production to 729,000 barrels per day, down from 1.1 million barrels per day, Commerzbank said.
The decline was due to pipeline maintenance work, but this has been completed so oil production should start rising again soon, the bank noted.
In addition, Reuters’ production survey confirmed that OPEC boosted its oil production by less than agreed upon in December, as the output of the 10 countries participating in the production cuts was only 150,000 barrels per day higher than in the previous month, according to Commerzbank.
Production also fell 650,000 barrels per day short of the agreed level. These demonstrate that OPEC is having difficulty implementing its output hike agreement, the bank said. #Oil Prices Rally Over Supply Concerns Amid Kazakhstan Conflict
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