Oil market continues to rise, driven by easing fears of Omicron

  Several factors combined to raise oil prices despite Omicron (Getty)

led to huge demand for buy oil, Due to supply disruptions and signs that the repercussions of mutant omicron From the Corona virus, it will not be as destructive as it raised fears before, to the rise in prices of some grades of crude oil in spot transactions to their highest levels in several years.

Traders say this indicates that the Brent rally in futures may last longer.

The prices of spot shipments do not always keep pace with the prices of futures contracts, and when the price differences between them increase rapidly and significantly, this could indicate that speculators have oversold or over-purchased futures contracts despite the fundamental factors that govern the market.

Brent crude prices have jumped in futures trading by 10% since the beginning of the year, but the spot market is still rising, and the price differences for some crudes have reached their highest levels in several years, which indicates that the scarcity of supply will lead to the continuation of the upward wave in futures transactions.

“These are crazy numbers,” said a North Sea oil trader. “It is clear that there is a shortage in the spot market.”

The main benchmark, Forties, rose to its highest price in two years on Thursday, to be sold at a premium of $ 1.80 a barrel over the price of the first month of Brent crude futures contracts.

Other North Sea crudes also rose to the highest price in a year or two. Prices of major West African crudes, such as Nigeria’s Bonny Light, have jumped since the start of the year.

The supply shortage began in the Atlantic Basin region, and spread as Asian buyers were forced to look for cheaper shipments elsewhere. The price differentials of crudes from the Sultanate of Oman, the UAE and the Far East of Russia jumped, with the Brent blend premium for crude swap contracts reaching its highest level in two months.

Reasons for price hike

Several factors combined to raise prices, after fears of the mutant Omicron spread like wildfire in the last quarter of last year, the demand for oil was not negatively affected, in what was a surprise that surprised the refiners, which reduced their purchases, and now they suddenly have to fill this deficit.

Violent protests in Kazakhstan, at the beginning of the year, raised fears of a prolonged supply disruption, which did not materialize, and if this happened, it would have exacerbated the breakdowns in other places, such as Libya, Canada and Ecuador. The situation for the outages in Libya and Ecuador improved greatly last week after shipping nearly 1 million barrels per day.

Meanwhile, OPEC members and their allies have stuck to the timeframe to slowly increase production, despite repeated calls from the United States and others to speed up the increase. Meanwhile, nuclear talks with Iran, which could result in oversupply, appear to be stalling.

“It turns out that Omicron is not that bad, and the supply problems are worse than expected,” said a trader specializing in US crude oil.

Inventories also shrunk in both the United States and Canada. On Wednesday, the US Energy Information Administration said that crude oil inventories fell more than expected, reaching their lowest level since October 2018.

“With spring and summer on the horizon…people are getting ready to enjoy a strong market,” said an American trader.

Some traders still believe that the market may lose steam with the emergence of new mutations from Covid, seasonal refinery maintenance in the second quarter, and possibly a slowdown in the Chinese economy.

(Reuters)

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