A growing increase in aggregate production disruptions in Nigeria, Ecuador, and Libya amid the rapid spread of the Omicron coronavirus variant has pushed the price of Brent Crude to $81, oil industry analysts have said.
On Wednesday, Brent crude futures gained 2.3 per cent to $81.36 a barrel by 1506 GMT, while U.S. West Texas Intermediate (WTI) crude steady near $78 a barrel after gaining 2.5percent over the last five sessions.
Analysts say prices were lifted as a result of high aggregate production disruptions in Nigeria, Ecuador, and Libya amid the rapid spread of the Omicron coronavirus variant.
The three oil producers declared forces majeure this month on part of their oil production because of maintenance issues and oilfield shutdowns, causing supply shortages at the global market.
“It’s unusual to see this kind of volatility during the year-end holidays,” said John Driscoll, founder of JTD Energy Services Pte.
“The underlying sentiment may be driven by convictions that oil prices initially overreacted to omicron and that global demand is on track to recover next year,” Driscoll said.
Nigeria has been experiencing shut-ins due to pipeline vandalism, community interferences, sabotage of oil facilities, among others and this has limited Africa’s largest oil producer’s capabilities to increase its production in recent months.
Ecuador’s government declared force majeure over its oil exports and production contracts on Monday because of the pipeline closures, caused by ongoing erosion in Napo province.
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The country’s crude production averaged 485,000 barrels per day before the force majeure and by Tuesday it had fallen to close to 220,000 barrels per day, according to government data.
In Libya, production from El Sharara, Libya’s largest field with a capacity of 300,000 barrels per day, as well as the El Feel, Wafa and Hamada fields, had been shut down by the Petroleum Facilities Guard (PFG), a paramilitary force whose brief is to protect NOC’s assets and facilities due to political dispute.
Oil’s recovery has also been supported as the Organization of Petroleum Exporting Countries and allies including Russia took a cautious approach to restoring output.
The group is due to meet next week to assess policy heading into 2022. Ahead of that, Russian Deputy Prime Minister Alexander Novak said that the country was comfortable with prices between $65 and $80.
Support also came as Britain and France made no move to impose more COVID curbs before the year-end.
In addition, the expectation of another large drop in US crude inventories also helped prices as the American Petroleum Institute (API) estimated the inventory draw for crude oil to be 3.09 million barrels.
US crude inventories have shed some 68 million barrels since the beginning of the year.
In the previous week, the API reported a draw in oil inventories of 3.670 million barrels, compared to the 2.633-million-barrel draw that analysts had predicted.
The Energy Information Administration (EIA) will release the official figures on Wednesday.
Meanwhile, Omicron-induced staff shortages led to thousands of flight cancellations over the Christmas weekend in the US, which could affect demand – although in the short term.
Investors continue to await a meeting of the Organisation of the Petroleum Exporting Countries and allies (OPEC+) on January 4, where it would be decided whether to go ahead with a planned production increase of 400,000 barrels per day in February.
