MercoPress. South Atlantic News Agency

COVID-19 and military unrest drive price of Brent crude up

OPEC+ countries have been slowly easing the output cuts put in place to support prices when demand had plunged in 2020

The international price of Brent crude Tuesday rose by 1.6% to nearly US $ 88 per barrel, its highest mark since late 2014, amid numerous problems regarding supply due to both the COVID-19 pandemic and also warlike episodes in the Middle East, it was reported.

Military tensions between Russia and Ukraine and Iran-backed Houthi rebels killing three in an attack at the United Arab Emirates capital of Abu Dhabi have added to the uncertainty which has helped push prices higher.

Meanwhile, the price for the US crude benchmark, West Texas Intermediate, was up more than 2% to over US $ 85 per barrel.

After Tusday's figures, Goldman Sachs foresees the price of oil could bounce back to US $ 100 by the third quarter of 2022, it was reported. The company also said in a note that it saw Brent prices at US $ 90 per barrel in the first quarter of 2022, US $ 95 in the second quarter and $100 per barrel in the last two quarters of the year.

“Importantly, we are not forecasting Brent trading above $100 per barrel on an argument of running out of oil as the shale resources is still large and elastic,” the brokerage said in a Jan. 17 note.

Benchmark Brent crude futures touched highs of US $ 88 a barrel Tuesday, its highest since October 30, 2014. Prices have been rising from lows $68 in the beginning of December as demand remained strong.

The attack by Yemen's Houthi group and the possibility of a retaliation by the latter has only added to the upside that experts said may continue.

“Robust fundamentals have reversed last year’s oil price melt-down, with the market remaining in a surprisingly large deficit as the Omicron demand hit is so far smaller (and likely briefer) than that of Delta excluding China. While the hit to Chinese demand will be large due to its zero-Covid policy, we see it offset by strong demand in 4Q21, gas-to-oil substitution and supply disappointments. Net, we expect inventory draws to narrow but persist through 1Q22, with the global surplus in 2Q22 smaller than seasonal at 0.4 mb/d,” Goldman Sachs said.

In this scenario, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, also known as OPEC+, have been slowly easing the output cuts put in place to support prices when demand had plunged in 2020.