Oil futures rose on Friday on course for a fourth weekly gain boosted by supply constraints and a weaker dollar and despite sources saying China is set to release crude reserves around the Lunar New Year.
Brent crude futures rose $1.09, or 1.3%, to a near a 2-1/2-month high of $85.55 a barrel at 12:33 p.m. ET (1733 GMT). U.S. West Texas Intermediate crude gained $1.26, or 1.5%, to $83.36.
“People looking at the big picture realize that global supply versus demand situation is very tight and that’s giving the market a solid boost,” said Phil Flynn, senior analyst at Price Futures Group.
Flynn also added that traders did not want to be short in the market amid increasing tensions between Russia and Ukraine and ahead of a long (Martin Luther King Jr Day) weekend in the United States, which typically sees less than average volumes.
A U.S. official said earlier on Friday that indications are that “Russian influence actors are already starting to fabricate Ukrainian provocations in state and social media to justify a Russian intervention and sow divisions in Ukraine.”
The dollar also headed towards what could be its largest weekly fall in four months. A weaker dollar makes commodities more affordable for holders of other currencies.
Several banks have forecast oil prices of $100 a barrel this year, with demand expected to outstrip supply, not least as capacity constraints among OPEC+ countries come into focus.
Libya’s National Oil Corp Chairman Mustafa Sanallah said oil prices were “expected to continue to rise unless the market fundamentals change and global investment upstream and downstream increases,” adding that total oil output from the country was 1.045 million barrels per day.
“When you consider that OPEC+ is still nowhere near pumping to its overall quota, this narrowing cushion could turn out to be the most bullish factor for oil prices over the coming months,” said PVM analyst Stephen Brennock.
However, sources told Reuters that China plans to release oil reserves around the Lunar New Year holidays between Jan. 31 and Feb. 6 as part of a plan coordinated by the United States with other major consumers to reduce global prices.
The U.S. Energy Department on Thursday said it had sold 18 million barrels of strategic crude oil.
China has also posted its first annual decline in crude oil imports in two decades, though traders expect imports to recover this year.
There were also concerns about fuel demand in the world’s second-biggest oil consumer as the Omicron coronavirus variant spread to the cities of Dalian and Tianjin.
Many cities, including Beijing, have urged people not to travel during the Lunar New Year holiday, which could cool demand.