U.S. crude rose more than 2% amid concerns about geopolitical risks exacerbating supply constraints

On Tuesday (Jan.
25), crude oil rose 1.
97% to close at $87.
97 a barrel
.
Fears of a possible tightening of oil supplies due to tensions in Ukraine and Russia, threats to infrastructure in the UAE and OPEC+'s difficulty meeting its monthly production growth target made it regain Monday's
panic-driven losses.

Crude inventories fell by 872,000 barrels, refined oil by 2.
239 million barrels, Cushing crude inventories by 1.
039 million barrels and gasoline inventories by 2.
43 million barrels
in the week ended Jan.
21, according to the American Petroleum Institute (API).

According to foreign media reports, Russia expressed great concern
after 8,500 US troops entered a standby state and prepared to deploy to Europe to prevent the escalation of the crisis in Ukraine.
In the Middle East, Yemen's Houthis, allied with Iran, previously launched missile strikes
on a base in the United Arab Emirates where U.
S.
troops are stationed.
U.
S.
and Emirati officials say the attack was thwarted
by U.
S.
-made Patriot anti-aircraft missiles.

Senior Biden administration officials said the United States is in dialogue with major energy producers and companies around the world to understand their willingness and ability
to redirect supplies to Europe if necessary if Russia invades Ukraine.
Ed Moya, senior market analyst at Oanda Americas, said geopolitical risks have pushed crude prices higher as the rather tight oil market, already dealing with low inventories, appears vulnerable to shortages
in the coming months.
The risks lie not only on the Russian-Ukrainian border, but also in the Iranian nuclear negotiations and North Korea
.

The U.
S.
Department of Energy announced on Tuesday the release of 13.
4 million barrels of crude oil from strategic reserves as part of
a new effort by the Biden administration to curb soaring oil prices.
According to the U.
S.
Department of Energy, the award to seven companies is the second largest oil transaction in the history of the U.
S.
Strategic Petroleum Reserve, and brings the total amount of oil released by the Strategic Petroleum Reserve to nearly 40 million barrels
.
The contracts are part of a plan announced by US President Joe Biden last November to release 50 million barrels of crude oil
from the SPR in partnership with India, Japan, South Korea and other countries.

Russia, the world's second-largest oil exporter, will export 1.
31 million barrels of Urals a day from the country's Baltic ports next month, the lowest level
since September last year.
Most of it ends up in refineries
in northwest Europe.
However, it is unclear what Russia's declining exports mean for the country's oil production, which should have been raised under OPEC+
's production plan.
But the country's domestic refineries appear to be at full capacity to accept crude that would otherwise be exported, and Russia looks likely to send more crude
directly to Europe through the Druzhba pipeline this year.

Russia's exports of major grades of crude will fall to a five-month low in February, underscoring Russia's oil supply challenges
amid a positive demand recovery outlook.

In addition, the difficulties faced by OPEC+ production increase plans have also exacerbated supply concerns
.
OPEC+ is trying to meet its goal of
increasing production by 400,000 b/d per month.
But consulting firm Eurasia Group (600697) wrote in a report that OPEC+ is expected to meet all its production pledges this month after making it difficult to increase production
several times last year due to capacity constraints.
The company's analysis is based on shipping data, and given the possibility that some tankers are not fully loaded, OPEC+ may announce a further 400,000 b/d
increase when it meets next week.

Recently, the market's expectations for the Fed's interest rate hike are in a sensitive stage of continuous restructuring and consensus, and as the FOMC meeting approaches, market panic is heating up, and the trend correlation of large asset classes is increasing
.
The tightening of monetary policy may converge the financial valuation of large assets such as crude oil and US stocks, resonate with large assets, and put pressure
on the space above crude oil.