Fundamental analysis
01 February, 2022
Oil prices climbed on Tuesday, hovering near seven-year highs hit last week, on expectations that a limited production increase by major oil producers and a solid post-pandemic recovery in fuel demand will keep a tight supply condition. They have gained about 17% in January, the biggest monthly gain since February 2021, amid a supply shortage and geopolitical tensions in Eastern Europe and the Middle East. Market analysts and Reuters sources widely expect OPEC+, which groups the Organization of the Petroleum Exporting Countries and allies led by Russia, to keep to its policy of gradual production increases when it meets on Wednesday. OPEC's oil output in January has again undershot the rise planned under a deal with allies, a Reuters survey found on Monday, highlighting some producers' struggle to pump more even as prices are high. The United States and Britain are prepared to punish Russian elites close to President Vladimir Putin with asset freezes and travel bans if Russia enters Ukraine, Washington and London said on Monday as tensions also spilled over at the United Nations. The risk of geopolitical disruptions to oil supply at a time of already tight inventories due to the strong post-pandemic recovery has sent the premium commanded by barrels for prompt delivery soaring, suggesting the current price rally has further to run.
