Crude oil futures near 2021 pandemic peaks as bull-run continues

Crude oil futures were higher in mid-morning trade in Asia Jan. 17, nearing multi-year peaks reached in October 2021, as the bull run in oil prices showed no signs of slowing down.

At 10:50 am Singapore time (0250 GMT), the ICE March Brent futures contract was up 5 cents/b (0.06%) from the previous close at $86.11/b, while the NYMEX February light sweet crude contract rose 32 cents/b (0.38%) at $84.14/b.

"Oil prices continue to trend higher. Concern over tightness in the oil market continues to support prices, although the market appears to be ignoring several developments in recent days," ING analysts Warren Patterson and Wenyu Yao said in a Jan. 17 note, pointing to the recent discovery of Beijing's first omicron case on Jan. 15.

Following strong gains over the last four weeks, the front month ICE Brent and NYMEX light sweet crude contracts were now a hair's breadth from 3 and 7-year highs, respectively, reached in late October.

"WTI crude is not too far from the October 25th high of $85.41/b, which means if that level is surpassed, prices may not have much resistance until just ahead of the psychological $90 level," OANDA's senior market analyst Edward Moya said in a Jan. 15 note.

Nonetheless, analysts cautioned that higher oil prices will also bring back the risk of political intervention.

Governments of major oil consuming nations have been vocal in recent months about the risks surging oil prices pose to their economies and consumers, with the Biden administration orchestrating in late November a coordinated oil reserve release among several countries.

"The market is... trading at levels where we will likely see further pressure on OPEC+ to increase output more aggressively. Noise around political intervention leaves the market at risk of further volatility," ING's Patterson and Yao said.

"Brent is now closing in on the recent high of $86.40/b and may test that level this week. We remain bullish on oil in the near term," OCBC Treasury Research analysts' said in a Jan. 17 note.