Oil rose for a third session as threats to global output risked tightening the market further before OPEC+ meets this week to discuss supply.
West Texas Intermediate futures climbed above $111 a barrel after adding about 5% over the past two sessions. Libya is facing more disruptions to its exports due to a worsening political crisis, while anti-government protests in Ecuador threaten to shut down production in the former OPEC member.
Any halt to supply could reverberate through the global oil market, which has been squeezed by an economic rebound and upended trade flows from Russia after its invasion of Ukraine. Some OPEC+ members have struggled to meet their production targets this year, exacerbating the tightness.
“Structural shortages remain unresolved,” said Stephen Innes, managing partner at SPI Asset Management. “More barrels must come to market for oil prices to move meaningfully and steadily lower.”
The prospect of additional supply from two of OPEC’s key producers also looks limited. French President Emmanuel Macron told his US counterpart Joe Biden that the United Arab Emirates and Saudi Arabia are already pumping almost as much as they can. Macron was relaying a conversation he had with UAE ruler Sheikh Mohammed bin Zayed. OPEC+ ministers gather on Thursday.
Oil is up almost 50% this year, although fears of a global economic slowdown have put futures on track for the first monthly loss since November. However, time-spreads that traders watch as indicators of supply and demand are flashing bullish signs and pointing to an urgent need for more supply.
Global demand could be set for an additional boost after Beijing and Shanghai contained Covid-19 following a punishing four-month fight that saw millions of residents locked in their homes. China has also cut its mandatory quarantine period in half for travelers and close contacts.
The market is still waiting for weekly US data on stockpiles and demand that was delayed last week after a power disruption. The Energy Information Administration said the timeline of publication of its Petroleum Status report is still unclear. Timing of its release will be provided “as soon as possible.”
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