By Peter Nurse
Investing.com -- Oil prices edged lower Monday, but remained near seven-year highs on expectations that global supply will remain tight while demand continues to recover from the pandemic.
By 9:35 AM ET (1435 GMT), U.S. crude futures traded 1% lower at $91.42 a barrel, while the Brent contract fell 0.5% to $92.82.
U.S. Gasoline RBOB Futureswere up 0.3% at $2.6856 a gallon.
Both contracts surged more than $2 at the end of last week, boosted by expectations a massive winter storm sweeping across much of the U.S. would hit much of Texas’ energy complex, in a repetition of events a year ago.
However, the lack of major disruption has caused some of those gains to dissipate.
Additionally, optimism is growing that the West can come to an agreement with Iran that would allow the resuscitation of a nuclear deal that let Islamic Republic produce and export its oil more easily. Talks are set to resume on Tuesday in Vienna.
Crude prices climbed to their highest levels since October 2014 on Friday, recording a seventh consecutive week of gains, against the backdrop of a very tight supply/demand balance only marginally improved by the restoration of production and exports from Libya. The North African country, which isn't bound by the OPEC+ agreement, has now raised its output back to 1.24 million barrels a day, industry officials said earlier.
The Organization of the Petroleum Exporting Countries and allies, a group known as OPEC+, has continued to gradually increase output targets, but has struggled to meet those targets. In the U.S., the rig count has been on the rise, but oil production remains far from pre-Covid-19 record levels.
Additionally, the turmoil on the Ukrainian border continues to add a geopolitical risk premium to the crude price, with White House national security adviser Jake Sullivan warning on Sunday that Russian President Vladimir Putin could order an attack on Ukraine within days.
Russia is the main supplier of gas to the European market, and an invasion would likely result in the West imposing sanctions on Moscow, potentially resulting in additional demand for crude.
On the demand side, Aramco (SE:2222) announced its official selling price for March cargoes over the weekend, increasing prices across the board. This suggested that the Saudi Arabian state oil giant is confident that consumers will see sufficient demand to tolerate higher prices.