Oil rises to $89 on Russia-Ukraine tensions

Oil rose to $89 a barrel on Wednesday, tracking a seven-year high backed by tight supplies and geopolitical tensions in Europe and the Middle East, raising concerns about further disruptions.

US President Joe Biden said on Tuesday that he would consider personal sanctions on President Vladimir Putin if Russia invades Ukraine. On Monday, Yemen’s Houthi movement launched a missile attack on a United Arab Emirates base.

“Concerns about potential supply disruptions in the Middle East and Russia are increasingly providing fodder for the oil market,” said Stephen Brennock of oil broker PVM.

Brent crude was up 61 cents, or 0.7%, to $88.81 at 0917 GMT. It reached $89.50 on January 20, the highest since October 2014. US West Texas Intermediate (WTI) crude rose 25 cents, or 0.3%, to $85.85.

Hiroyuki Kikukawa, general manager of research at Nissan Securities, said: “The market decline is limited by rising tensions between Russia and Ukraine and the threat to infrastructure in the UAE.”

Traders said crude oil stocks fell by 8,72,000 barrels on Tuesday in the American Petroleum Institute’s weekly US inventory report, underlining the tight balance of supply and demand.

Investors in the markets are also waiting for an update from the US Federal Reserve. The Fed is expected to indicate a plan to raise interest rates in March as it focuses on fighting inflation.

OPEC+ to meet

In another significant development, the Organization of the Petroleum Exporting Countries and Allies, known as OPEC+, meet on February 2 to consider another production hike.

OPEC+ is gradually cutting output for 2020, raising its monthly target to 400,000 barrels per day, although the actual increase in supply has fallen short of this as some countries struggle to ramp up production.

OPEC+ will likely stick to a planned increase in output target for March, several sources in the group said, as it sees demand recovery despite downside risks from the pandemic and interest rate hikes.