Oil prices increased on Tuesday as supply concerns persist due to tight supply from producers of the Organization of Petroleum Exporting Countries and allies (OPEC+) and because many countries are yet to impose new restrictions to curb the spread of the omicron variant.
International benchmark Brent crude was trading at $81.28 per barrel at 0605 GMT for a 0.5% increase after closing the previous session at $80.87 a barrel.
American benchmark West Texas Intermediate (WTI) traded at $78.77 per barrel at the same time for a 0.7% increase after the previous session ended at $78.23 a barrel.
Upward price movements were mainly driven by investor relief over increased demand given that restrictions have not yet been implemented in many countries for the omicron variant despite its fast spread.
Market tightness, with the fall in production from OPEC+, is also supporting higher prices.
Although in its most recent meeting, the group decided to extend the current plan to increase output by 400,000 barrels per day (bpd) through February, some member countries like Nigeria and Libya are failing to meet their production targets, resulting in a shortfall in the group’s overall output quota.
Libya’s oil production has faced severe constraints, dropping from a high of 1.3 million bpd to about 800,000 bpd amid the political impasse and required pipeline maintenance.
However, production is projected to resume in the Sharara and El Feel Field, restoring daily production to 300,000 bpd after crude production was shut down by the Petroleum Facilities Guard (PFG), a paramilitary unit tasked with protecting the assets and facilities of Libya’s National Oil Corporation.
Nigeria's oil production over the past year has been losing pace due to a lack of investment and maintenance.
The upward price trend is also supported by a weaker US dollar making crude purchases cheaper and expectations of potential interest rate rises are increasing investors’ risk appetite.
By Ebru Sengul Cevrioglu