Brent Crude trades near highest since 2014 on tightening market

[SINGAPORE] Brent oil traded near the highest intraday level since 2014 as the market tightened and concerns about the impact of Omicron eased.

Futures in London held at about US$86 a barrel after a fourth weekly advance on Friday as winter temperatures supported demand for heating fuels. Meanwhile, geopolitical jitters returned as Yemen's Houthi fighters claimed to have launched drone strikes on the United Arab Emirates that caused an explosion and fire on the outskirts of the capital Abu Dhabi leaving three people dead.

Oil's market structure has firmed in a bullish backwardation pattern, indicating growing supply tightness. High prices are justified and futures could rise even further, said trader Vitol Group, but it added that gains were tempered on Monday by signs of slowing Chinese economic growth.

Oil has rallied more than 10 per cent so far this year, in part due to outages in OPEC+ producers including Libya. The International Energy Agency said last week that global consumption has turned out to be stronger than expected, while the physical market is booming as buyers look beyond the spread of Omicron.

"There is a genuine belief that physical demand will keep exceeding supply," said Tamas Varga, an analyst at brokers PVM Oil Associates Ltd. "On the demand side, the cold winter in North America is one of the major factors. Mild Omicron symptoms and hopes that the rapid rise in cases is about to abate also contributed to the strength." The Covid-Zero policy employed by China probably will ensure that there's no Omicron outbreak big enough to significantly diminish the use of oil products there, Mike Muller, Vitol's head of Asia, said Sunday during a webinar hosted by Dubai-based consultants Gulf Intelligence.

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