Oil pipelines resumed, API inventories increased, and oil distribution fell sharply after breaking through the 89 mark

On Wednesday (January 19), the U.
S.
oil February contract rose 0.
87% to close at $86.
96 / barrel
.
With tight supplies, the spread on crude oil futures for recent U.
S.
deliveries soared, quickly rising above
$1/b.
The International Energy Agency (IEA) said that the market supply looks tighter than previously thought, and demand has proved resilient under the omicron epidemic, providing support
for oil prices to continue to rise in recent days.

The spread between the U.
S.
oil February and March contracts briefly topped $1 a barrel before the February contract expired on Thursday, the strongest
since mid-November.
According to the data, open positions on the $1 calendar spread option have climbed to almost 7,000 lots
.
Trading dollars that bought $1 calendar spread options in recent weeks could keep prices at this level to cash out, providing further support
, traders said.
Spot supply has also tightened
in recent weeks as oil production growth in December and January was lower than traders expected.

Earlier data released by the American Petroleum Institute (API) showed that in the week ended January 14, US crude oil inventories increased by 1.
404 million barrels, gasoline inventories increased by 3.
463 million barrels, refined oil inventories decreased by 1.
496 million barrels, and Cushing crude oil inventories decreased by 1.
496 million barrels
.
After the data was released, U.
S.
oil fell nearly $
0.
50.

Oil prices hit a more than seven-year high
when a key pipeline from Iraq to Turkey was suspended by an explosion.
Deliveries have been resumed on the Kirkuk to Ceyhan pipeline, which transports crude oil from northern Iraq to the Turkish port of Ceyhan for export
.
Iraq is the second largest producer of the Organization of the Petroleum Exporting Countries (OPEC
).
A senior security source said the explosion that triggered the pipeline fire in Turkey's southeastern province was caused by a falling cable tower, not an attack
.

Supply concerns have increased this week after Yemen's Houthi attacked OPEC's third-largest oil producer, the United Arab Emirates, while Russia, the world's second-largest oil producer, amassed a large number of troops near the Ukrainian border, raising fears of
its invasion of Ukraine.

Craig Erlam, senior market analyst at OANDA, said: "While $90 a barrel may trigger some profit-taking and a slight cooling in prices, it suggests that they will not see a respite and we may soon see oil prices reach $100 per barrel
.
" ”

The International Energy Agency (IEA) said in its monthly oil report that oil supply will soon exceed demand as production in some oil-producing countries will be at or above record highs, while demand remains firm
despite the spread of the Omicron variant.
This time the surge in the number of coronavirus cases has had a smaller impact on oil consumption
.
The easing of lockdown measures means that the movement of people remains strong, which led the IEA to raise its oil demand forecast for last year and 2022 by 200,000 b/d
.

On the supply side, the IEA said a steady increase in supply could lead to a significant oversupply in the first quarter of 2022 and beyond, as U.
S.
, Canada and Brazil are expected to record oil production this year, while Saudi Arabia and Russia are also likely to break records
.
However, the IEA warned that any reduction in supply could make the oil market volatile
in 2022 as commercial oil and fuel inventories in member countries of the Organisation for Economic Co-operation and Development (OECD) are at their lowest levels in seven years.

Rebecca Babin, senior energy trader at CIBC Private Wealth Management, said: "The market has priced in the possibility of tighter supply in 2022, and the IEA and others are simply catching up to market expectations
.
Oil prices are likely to continue to move higher, and in a tight supply market, the risk of events can cause prices to move sharply to the upside.
"