Oil crosses $ 90 a barrel for the first time since 2014 on falling inventory, increased and demand and geo-political tensions

Oil touched $90 a barrel for the first time in seven years, supported by tight supply and rising political tensions in Russia that raised concerns about further disruption in an already-tight market. Brent crude rose $2.02, or 2.3%, to $90.22 on Wednesday, the first time the global benchmark has broken $90 since October 2014. U.S. West Texas Intermediate (WTI) crude was up $2.09, or 2.4%, to $87.69.

Earlier this week, Yemen’s Houthi movement launched a missile attack on a United Arab Emirates base. World inventories have continued to decline as producers have struggled to restore production to pre-pandemic levels. 

The tension between Russia and Ukraine has only added to worries about the various factors contributing to an already tight market. U.S. President Joe Biden said on Tuesday he would consider personal sanctions on President Vladimir Putin if Russia invades Ukraine.

OPEC+ is having trouble meeting monthly production targets as it restores supply to markets after drastic cuts in 2020, and the United States is more than a million barrels short of its record level of daily output.

At the same time, demand remains strong, and is increasing. The Organization of the Petroleum Exporting Countries and allies, known as OPEC+, will meet on 2 February to consider another output increase.

Inventories in the United States rose in the most recent week, with crude stocks up by 2.4 million barrels, against expectations for a modest decline in stocks, Reuters reports. Gasoline inventories rose to their highest levels in almost a year – a needed salve for the market. U.S. refined product supplied – a measure of demand – surged again, putting the four-week moving average at 21.2 million barrels per day, ahead of pre-pandemic trends. The increases have been led by consumption of distillates like diesel, as gasoline use has fallen off modestly in recent weeks. Investors across the markets are awaiting the coming policy update from the U.S. Federal Reserve.  The Fed is expected to signal plans to raise interest rates in March as it focuses on fighting inflation.

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