This is as global demand shrugs off the Omicron variant of the coronavirus, while a host of supply constraints hit producers from Canada to Russia.
But the rally was bad news for fuel-hungry countries like Nigeria with the Nigerian National Petroleum Corporation (NNPC) now paying more in petrol subsidy and negatively impacting its contribution to the federation account.
Nigeria is pumping roughly 1.35 million barrels , the lowest figure in years.
Likewise, Libya – which managed to pump more than one million barrels a day every month last year but is now producing about 25 per cent less than that.
Goldman Sachs Group’s head of Global Research, said that only two countries in the world – Saudi Arabia and the United Arab Emirates – can pump more today than they did in January 2020 before the pandemic really hit demand.
“That could see the oil market tighten over the next three to six months,” he said.
Morgan Stanley expects Brent to climb to $90 a barrel by the third quarter and estimates that observable stockpiles fell by about 690 million barrels last year.
“We suspect that further strength lies ahead,” analysts at the bank said.
“With the prospect of low inventories and spare capacity by the second half, further demand recovery into 2023, and still limited investments being made, the oil market appears to be heading for a period with little margin of safety,” he added.
“The bullish sentiment has regained the narrative,” said Mr Michael Tran, a commodities strategist at RBC Capital Markets.
“With improving demand, tightening inventories, and questions of OPEC’s ability to ramp further, the directional arrows of progress point to further optimism,” he added.
Movements in the price of oil are felt more keenly and quickly than that of any other commodity because they pass almost immediately into the cost of end-products such as petrol, diesel and jet fuel.
While Nigerians wait with apprehension for the planned removal of subsidy in the New Year, this month, there were riots across Kazakhstan after the government there allowed the price of liquefied petroleum gas – a key road fuel – to surge.
In terms of petroleum demand, the Organisation of Petroleum Exporting Countries (OPEC) and its producer-nation allies have signalled that they are confident the virus will not derail the recovery, and will continue with their strategy of gradually restoring output halted during the pandemic.
While the group still says it believes markets are tipping back into oversupply, its forecasts for this quarter have turned markedly less pessimistic as supply growth from its rivals disappoints.
But a deep freeze in Canada and the northern US is disrupting oil flows, boosting prices just as American stockpiles decline even as Russia failed to boost oil output last month despite a generous ramp-up in its OPEC+ quota.
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