By Myra P. Saefong and William Watts
Oil futures extended their climb Wednesday to post another settlement at their highest in more than seven years, after a pipeline fire temporarily disrupted crude flows from Iraq to Turkey and the International Energy Agency raised its forecast for 2022 demand growth.
Officials said crude flows through the Kirkuk-Ceyhan pipeline resumed, after it was stopped on Tuesday due to a blast near the pipeline in southeastern Turkey, Reuters reported . Officials said the explosion was due to a falling power pylon, not an attack, the report said. The pipeline has a capacity of 450,000 barrels a day.
Oil futures surged following initial reports of the explosion, giving back some of the gains after operations were resumed. Analysts said the reaction to the outage and its subsequent resolution underscores how sensitive the market is to supply concerns.
“The pattern of recent weeks is being repeated, in other words: news about supply outages pushes prices up significantly, yet prices do not drop back to their previous level once the problems have been resolved,” said Carsten Fritsch, analyst at Commerzbank, in a note.
West Texas Intermediate crude for February delivery /zigman2/quotes/211629951/delayed CL.1 +3.48% rose $1.53, or 1.8%, to settle at $86.96 a barrel on the New York Mercantile Exchange, after trading as high as $87.92. The most active March WTI contract /zigman2/quotes/209723049/delayed CL00 +3.48% , which becomes the front month after Thursday’s settlement, rose 97 cents, or 1.1%, at $85.80 a barrel.
March Brent crude , the global benchmark, rose 93 cents, or 1.1%, at $88.44 a barrel on ICE Futures Europe, after hitting a high of $89.17.
Both WTI and Brent logged their highest settlements since October 2014, based on the front-month contracts.
Geopolitical instability, following a rocket attack earlier this week in the United Arab Emirates, attributed to the Yemeni Houthi movement, as well as “growing alert over a possible Russian attack in Ukraine,” have also contributed to oil’s rise, said Ricardo Evangelista, senior analyst at ActiveTrades, in a daily note.
“Supply has been tight for a while, as global demand continues to bounce back and OPEC+ member countries so far failing to reach a previously agreed increase in production,” Evangelista said. So “the latest developments are an unwelcome addition, exacerbating pressure on already tight markets and creating scope for further oil price increases.”
Meanwhile, the Paris-based International Energy Agency on Wednesday forecast global oil demand to return to pre-pandemic levels this year. The IEA hiked its oil-demand growth forecast for 2022 by 200,000 barrels a day, to 3.3 million barrels a day. It also raised its demand growth forecast for 2021 by 200,000 barrels a day to 5.5 million barrels a day.
The Organization of the Petroleum Exporting Countries, in its monthly report on Tuesday, left its forecast for 2022 growth in oil demand unchanged at 4.2 million barrels a day, estimating total global consumption at 100.8 million barrels a day.
Weekly U.S. petroleum supply data from the Energy Information Administration will be delayed to Thursday, a day later than usual because of Monday’s Martin Luther King, Jr., holiday.
On average, analysts expect a decline of 700,000 barrels in domestic crude inventories for the week ended Jan. 14, according to a poll conducted by S&P Global Platts. They also forecast an increase of 2.4 million barrels for gasoline stockpiles, but distillate supplies are seen down by 1.1 million barrels.
On Nymex Wednesday, February gasoline added 1% to $2.457 a gallon and February heating oil climbed 0.7% to $2.692 a gallon.
Natural gas for February delivery settled at $4.031 per million British thermal units, down 5.9% after last week’s 8.8% rise.