Oil prices rose to the end of January on Monday, posting their biggest monthly gain in a year on supply shortages and political tensions in Eastern Europe and the Middle East.

The most-active Brent contract for April delivery rose 74 cents, or 0.8%, to settle at $89.26 a barrel. The front-month contract for March delivery, which expires at the close, was up $1.18, or 1.3%, at $91.21.

U.S. West Texas Intermediate crude gained $1.33, or 1.5%, to settle at $88.15 a barrel.

The benchmark index hit its highest level since October 2014 on Friday, at $91.70 and $88.84, its sixth straight weekly gain. They are up about 17% this month, their biggest gain since February 2021.

Market analysts and Reuters sources widely expect OPEC+, which comprises the Organization of the Petroleum Exporting Countries and allies led by Russia, to maintain its policy of gradually increasing output when it meets on Wednesday.

OPEC+ producers have boosted output by 400,000 bpd per month since August.

Louise Dickson, senior oil market analyst at Rystad Energy, said: “A 400,000 bpd monthly supply increase is either too inconsequential for the market to appreciate, and more importantly, the group has not fully achieved that. “

“As a result, the only short-term solution to balance the undersupplied oil market will need to come from OPEC+ and be dominated by Saudi Arabia, the producer with the largest spare capacity.”

However, OPEC’s oil output in January again fell short of the planned increase in a deal with allies, a Reuters survey found, underscoring the difficulty some producers have struggled to increase output even at seven-year highs.

Geopolitical tensions involving major oil producers Russia and the United Arab Emirates intensified in January.

Europe needs to diversify its energy supplies, the NATO chief said on Sunday, as Britain warned Russia was “very likely” to try to invade Ukraine.

Markets were also wary of the Middle East after the UAE said it had intercepted a ballistic missile fired by Yemen’s Houthis, as the Gulf state hosted Israeli President Isaac Herzog on the first such visit.

Complete News Source : Business Standard