By Adedapo Adesanya
The Brent crude was traded at $91.21 per barrel on Monday after it gained $1.18 or 1.31 per cent as a supply shortage and political tensions in Eastern Europe and the Middle East put prices on track for their biggest monthly gain in almost a year.
During the session, the United States West Texas Intermediate (WTI) crude oil futures appreciated by $1.32 or 1.52 per cent to sell for $88.14 per barrel.
It was the last trading session for January 2022 and on a monthly basis, the oil market improved by 17 per cent, the strongest January performance in at least 30 years.
This is happening as concerns about supply outages in connection with the Ukraine crisis keep pushing prices even further up.
The head of NATO, Mr Jens Stoltenberg, said on Sunday that Europe needed to diversify its energy supplies as Britain warned it was “highly likely” that Russia was looking to invade Ukraine.
“We are concerned about the energy situation in Europe because it demonstrates the vulnerability of being too dependent on one supplier of natural gas and that’s the reason why NATO allies agree that we need to work and focus on diversification of supplies,” he said.
Tensions have risen as Russia has amassed some 120,000 soldiers on the Ukrainian border and demanded the Western defence alliance pull back troops and weapons from Eastern Europe and bar Ukraine, a former Soviet state, from ever joining NATO.
The other geopolitical risk is in the Middle East, where the United Arab Emirates (UAE) reported a third attack in January, following the deadly attack with drones from the Iran-aligned Houthis two weeks ago and intercepted missiles last week.
On Monday, the UAE again said it had intercepted and destroyed a ballistic missile launched by the Houthi group, with the UAE Defense Ministry saying there were no casualties.
The ministry affirmed its full readiness to deal with any threats, adding that it will take all necessary measures to protect the UAE from any attacks.
The likely supply disruptions is coming when a former member of the Organisation of the Petroleum Exporting Countries (OPEC), Ecuador, suspended pumping crude in its privately held heavy crude pipelines on Saturday as a preventative measure after it ruptured in the Amazon and began cleaning and repairs.
Ecuador left the then 14-member cartel on January 1, 2020, due to fiscal problems.
Meanwhile, OPEC and its allies, OPEC+ are meeting on Wednesday, February 2 to decide production levels for March, while the market is looking at how much of the increase the alliance can actually deliver.
The alliance has raised their output target each month since August by 400,000 barrels per day and all indications show it is likely to stick with a planned rise in its oil output target for March.
However, analysts note that instead of the expected 400,000 barrels per day increase, the market is more interested in finding out how much the group can deliver after more than half of its members struggled in recent months.
It was noted that this decision will continue to support a continued rally.
There are signs that OPEC’s oil output in January was again under levels expected from the output deal with allies, showing that some producers will continue to struggle to pump more even as prices trade at a seven-year high.
