Crude oil futures rose in mid-morning trade in Asia Jan. 25, after a selloff the previous day, as the Pentagon put 8,500 troops on “heightened readiness” over the Ukraine tensions, and amid geopolitical tensions in the Middle East.
At 10:46 am Singapore time (0225 GMT), the ICE March Brent futures contract rose 57 cents/b (0.66%) from the previous close at $86.84/b, while the NYMEX March light sweet crude contract rose 40 cents/b (0.48%) at $85.71/b.
The US Pentagon said late Jan. 24 it has put 8,500 troops in the US on heightened alert over tensions in Ukraine. The group will be part of the NATO Response Force if activated.
A foiled Houthi missile attack on Jan. 24, directed at OPEC’s third-largest oil producer the UAE, have also raised supply concerns.
The intercepted attack followed a Jan. 17 drone and missile strike on an Abu Dhabi National Oil Co. fuel depot in the industrial zone of Musaffah.
“Oil prices climbed on Tuesday morning [Jan. 25] to regain some of the ground lost overnight on concerns over possible supply disruptions amid rising geopolitical tensions in both Eastern Europe and the Middle East,” Avtar Sandu, senior manager of commodities at Phillip Futures said.
Outlook on demand remained healthy, even as the number of COVID-19 infections have risen in recent weeks, with oil producers seen struggling to meet rising demand, analysts said.
“The International Energy Agency joined OPEC in noting that demand has been relatively robust. Saudi Aramco CEO Amin Nasser said that demand is nearing pre-COVID levels. He also warned that producers are investing too little,” ANZ analysts said in a Jan. 25 report.
This has seen OPEC struggle to increase output despite the group raising quota levels in recent months… US crude oil output remains well below pre-pandemic levels amid subdued investment from the US shale oil industry,” they added.
Total US commercial crude oil stocks likely fell 2.1 million barrels to around 411.7 million barrels in the week ended Jan. 21, analysts surveyed by S&P Global Platts said Jan. 24, as exports pushed to six-week highs.
The draw would leave stocks at its lowest since October 2018 and around 8.7% behind the five-year average of the US Energy Information Administration data.
Crude oil prices rebounded during Jan. 25 morning trade after a selloff on Jan. 24 when prices fell sharply during midday US trading.
“As the FOMC [Federal Open Market Committee] sits down to discuss the economic outlook, concerns are mounting that they will raise rates quicker than previously expected amid high inflation. A stronger US dollar also weighed on investor appetite,” the ANZ analysts wrote.