Oil prices were steady on Monday, as investor bets that global supply will remain tight amid restraint by major producers were offset by a rise in Libyan output.

Brent crude was down 4 cents, or 0.1%, to $86.02 a barrel by 0953 GMT. Earlier in the session, the contract touched its highest since Oct. 3, 2018 at $86.71.

U.S. West Texas Intermediate crude was up 20 cents, or 0.2%, at $84.02 a barrel, after hitting $84.78, the highest since Nov. 10, 2021, earlier in the session.

Frantic oil buying, driven by supply outages and signs the Omicron variant of COVID-19 will not be as disruptive as feared for fuel demand, has pushed some crude grades to multi-year highs, suggesting the rally in Brent futures could be sustained a while longer, traders said.

“The bullish sentiment is continuing as (producer group) OPEC+ is not providing enough supply to meet strong global demand,” said Toshitaka Tazawa, an analyst at Fujitomi Securities.

The Organization of the Petroleum Exporting Countries, Russia and their allies, together known as OPEC+, are gradually relaxing output cuts implemented when demand collapsed in 2020.

But many smaller producers cannot raise supply and others have been wary of pumping too much oil in case of renewed COVID-19 setbacks.

Meanwhile, Libya’s total oil output is back to 1.2 million barrels per day (bpd), according to the National Oil Corp. Libyan output was around 900,000 bpd last week, due to the blockade of western oilfields.

“Libya’s oil production had dropped to a good 700,000 barrels per day at the start of the year, which had played its part in the price rise,” said Commerzbank (DE:CBKG) analyst Carsten Fritsch.

Concerns over supply constraints outweighed the news of China’s possible oil release from reserves, Fujitomi analyst Tazawa said.

Sources told Reuters that China plans to release oil reserves around the Lunar New Year holidays between Jan. 31 and Feb. 6 as part of a plan coordinated by the United States with other major consumers to reduce global prices.

Saudi Energy Minister Prince Abdulaziz bin Salman said on Monday it is the prerogative of the U.S. government whether to release supply from the strategic petroleum reserves.

 

Festering geopolitical threats to supply are also supporting bullish sentiment, analysts said.

U.S. officials voiced fears on Friday that Russia was preparing to attack Ukraine if diplomacy failed. Russia, which has amassed 100,000 troops on Ukraine’s border, released pictures of its forces on the move.

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