Oil prices were steady today 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 12 cents, or 0.1%, at $85.94 a barrel this afternoon. Earlier in today's session, the contract touched its highest since October, 2018, at $86.71.
US West Texas Intermediate crude was up six cents, or 0.1%, at $83.88 after touching its highest since November 10 at $84.78.
Frantic oil buying, driven by supply outages and signs the Omicron coronavirus variant will not be as disruptive to fuel demand as previously feared, has pushed some crude grades to multi-year highs.
This suggests that the rally in Brent futures could be sustained for 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 Fujitomi Securities analyst Toshitaka Tazawa.
The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, 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 National Oil Corp. Libyan output was about 900,000 bpd last week owing to a blockade of western oilfields.
"Libya's oil production had dropped to a good 700,000 bpd at the start of the year, which had played its part in the price rise," said Commerzbank analyst Carsten Fritsch.
Concerns over supply constraints outweighed the news of China's possible oil release from reserves, said Fujitomi's Tazawa.
Sources told Reuters that China plans to release oil reserves around the Lunar New Year holidays between January 31 and February 6 as part of a plan coordinated by the US to reduce global prices.
Saudi Energy Minister Prince Abdulaziz bin Salman said today that it is the prerogative of the US government whether to release supply from strategic petroleum reserves.
Festering geopolitical threats to supply are also supporting bullish sentiment, analysts said.
US 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.