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Oil Prices Jump Underpinned By Tighter Supply, Higher Demand And Optimism Over Pandemic End

January 24, 2022

Oil prices jumped on Monday as the effects of the Omicron variant of the coronavirus fades in top economies across the world.  Brent, the crude benchmark rose to $89 per barrel on Monday, representing a return to a 2014-high.

This weekend, President Biden's Chief Medical Adviser, Anthony Fauci expressed confidence that infections of the Omicron variant will soon peak with many people expressing optimism that the pandemic will soon become an endemic thereby easing public health concerns.

“The pulse continues to sit firmly with oil bulls, given the robust physical market, with optimism over Covid-19 pivoting from pandemic to endemic,” Ehsan Khoman, Head of Emerging Markets Research at MUFG Bank told MSN Money.

“With stockpiles falling, bullish investor positioning rising, spare capacity increasingly scarce and geopolitical tensions lingering, the outlook for oil prices cannot be more positive right now,” he continued.

In the same vein, Vandana Hari, founder of Vanda Insights in Singapore told Bloomberg that “Physical market demand is strong, as is optimism over Covid turning endemic.” 

“Oil’s narrative remains bullish, pointing to continued strength in prices interrupted by mild pullbacks.”
Additionally, brewing tensions between Russia and Ukraine as well whispers of unrest between the UAE; OPIC’s third-largest producer of oil and Yemen have all contributed to tighter oil supply amidst a growing demand across economies. 

This weekend, the UAE said it interrupted two ballistic missiles fired by Houthi fighters in Yemen. Last week, Bloomberg reported that the Iran-backed Yemeni rebels launched a drone attack outside the UAE capital city of Abu Dhabi, leading to a rise in oil prices.















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