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Oil climbs to a seven-year high as supply surplus shrinks and demand soars

Oil climbed to the highest since October 2014 as the International Energy Agency (IEA) said yesterday that the market looked tighter than previously thought, with demand proving resilient to Omicron. Photo: Reuters

Oil climbed to the highest since October 2014 as the International Energy Agency (IEA) said yesterday that the market looked tighter than previously thought, with demand proving resilient to Omicron. Photo: Reuters

Published Jan 20, 2022

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OIL CLIMBED to the highest since October 2014 as the International Energy Agency (IEA) said yesterday that the market looked tighter than previously thought, with demand proving resilient to Omicron.

The global supply surplus is shrinking and oil demand is on track to hit pre-pandemic levels, according to a report from the IEA. The agency also said there was a growing gap between changes in global stockpiles and supply-demand balances. That was a further indication that production could be lower, or consumption could be higher, than the market estimates, it said. Futures in New York surpassed $87

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(R1 344) a barrel earlier in the session after an explosion on Tuesday knocked out a key crude pipeline running from Iraq to Turkey. The disruption was short-lived, with prices trading about 50 cents below their session high by mid-morning. Oil markets have tightened in recent weeks due to stronger-than-expected demand and outages in Opec+ producers including Libya, with buyers in Asia paying sharply higher premiums for spot cargoes.

The sizzling start to the year has prompted Goldman Sachs to boost its forecasts for global benchmark Brent, predicting $100 oil in the third quarter. Concerns about the impact of the Omicron variant of Covid-19 have eased, global stockpiles are shrinking and unrest in the Middle East is back on the radar after a drone attack on oil facilities in the United Arab Emirates. West Texas Intermediate for February delivery was 1.6 percent higher at $86.76 a barrel at 10.58am in London after gaining as much as 1.9 percent earlier. Brent for March settlement rose 1.2 percent to $88.54. The spread between the nearest two December contracts was in backwardation of more than $6 a barrel – a bullish structure indicating tight supplies.

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