Oil prices turned lower during trading on Friday, with Brent crude falling below $ 82, but it is still on track to achieve weekly gains, driven by supply concerns amid escalating unrest in Kazakhstan and outages in Libya.
Investor sentiment was negatively affected, with the US economy adding 199,000 jobs less than analysts’ expectations in December.
On Thursday, oil prices ended their trading with a rise of more than 2%, coinciding with the drop in sub-zero temperatures in Canadian Alberta and North Dakota in the United States, which caused production to stop in some crude fields and to stop pumping black gold into pipelines.
Oil prices today
Brent crude futures prices – for March 2022 delivery – decreased by 0.2%, recording $81.84 a barrel.
The prices of West Texas Intermediate crude futures – February delivery – also fell 0.5%, recording $79.11 a barrel, after exceeding $80 during the session.
The two benchmark crudes, “Brent and West Texas Intermediate”, are heading to achieve gains of about 6% in the first week of the year, with prices rising to their highest levels since late November 2021, as supply concerns outweighed fears that the rapid spread of the Corona virus Omicron could harm demand.
Oil market turmoil
“The upward rally in oil prices mostly reflects market tension with the escalation of unrest in Kazakhstan and the continued deterioration of the political situation in Libya and the marginalization of oil production,” said Rystad Energy analyst Louise Dixon.
After days of turmoil in Kazakhstan, during which the government declared a state of emergency, Russia sent paratroopers on Thursday, after the Kazakh president requested support to deal with the chaos in the country.
The protests began in the oil-rich western regions of Kazakhstan, after the removal of caps on liquefied petroleum gas prices at the start of the new year.
At the same time, experts say that supply additions from the Organization of the Petroleum Exporting Countries (OPEC) and its overseas allies led by Russia, in the alliance known as OPEC+, are not keeping pace with demand growth.
OPEC production in December rose by 70,000 bpd from the previous month, versus the 253,000 bpd increase allowed under the OPEC+ deal, which brought back production cut in 2020 when demand collapsed amid coronavirus lockdowns.
Production in Libya fell to 729,000 bpd, down from 1.3 million bpd last year, in part due to pipeline maintenance.
Analysts at Fitch Solution said the Omicron mutation is rapidly entrenching, and demand-side concerns are easing amid mounting evidence that it is less severe than previous mutations, and as governments generally use less stringent containment measures in response.
Low oil inventories in Europe and America also support market sentiment, but overall higher prices have stoked inflation fears, which could affect any further gains in oil prices, said Guatemalan senior researcher Junan Future, Wang Xiaolong.