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Oil extends gains on geopolitical tensions, supply concerns

Crude oil

Brent crude jumped 59 cents, or 0.7%, to $91.24 a barrel, and U.S. WTI crude was at $87.02 a barrel, up 43 cents, or 0.5%

Oil prices extended gains on Friday and headed for a second weekly gain amid geopolitical tensions in Europe and the Middle East, concerns over tightening supply and optimism about global fuel demand growth as economies improve.

Brent crude jumped 59 cents, or 0.7%, to $91.24 a barrel by 0646 GMT. U.S. West Texas Intermediate (WTI) crude was at $87.02 a barrel, up 43 cents, or 0.5%.

Both benchmarks settled at their highest since October on Thursday.

Oil prices look set for further upside in the short term as a more positive economic backdrop is joined by ongoing supply tightness and growing geopolitical risks, ANZ analysts Daniel Hynes and Soni Kumari stated in a note, as the bank raised its three-month price target for Brent to $95 a barrel.

Brent and West Texas Intermediate are set to notch a more than 4% gain this week, jumping for a second consecutive week, after third-biggest OPEC producer Iran vowed revenge against Israel for an attack.

Ongoing Ukrainian drone attacks on refineries in Russia may have disrupted over 15% of Russian capacity, hitting the country’s fuel output.

The Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, known as OPEC+, this week kept their oil supply policy unchanged and pressed some countries to increase compliance with output cuts.

Further clampdowns on adherence to quotas should see output fall further in the second quarter, according to the ANZ analysts.

The prospect of a tighter market should see a drawdown in inventories during the second quarter, they added.

Heavy oil supply has also tightened globally after Mexico and the UAE cut exports of these grades.

This comes amid solid global oil demand growth of 1.4 million bpd in Q1, JPMorgan analysts stated in a note.

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