Early Asian trading on Monday saw a surge in oil prices, driven by mounting worries regarding tightened global supply exacerbated by escalating conflicts in the Middle East and tensions between Russia and Ukraine. Additionally, a decrease in the U.S. rig count further fueled upward price pressures.
At 0359 GMT, Brent crude futures rose by 52 cents, or 0.6%, reaching $85.95 a barrel, while U.S. crude futures saw a gain of 55 cents, or 0.7%, reaching $81.18 per barrel.
Despite a slight decline of less than 1% last week compared to the previous week, both benchmarks were influenced by a stronger U.S. dollar, which surged approximately 1% over the same period, imposing limitations on price movements.
Hiroyuki Kikukawa, president of NS Trading, a subsidiary of Nissan Securities, highlighted the growing concerns over global oil supply amidst escalating geopolitical tensions. He pointed to increased attacks on energy facilities in Russia and Ukraine, alongside dwindling hopes for a ceasefire in the Middle East, as factors contributing to the apprehension.
Data from energy services firm Baker Hughes revealed a reduction in the U.S. oil rig count by one to 509 last week, signaling a potential decline in future supply.
Moscow’s recent military actions, including the launch of 57 missiles and drones targeting Kyiv, Ukraine’s capital, following extensive aerial bombardments on the country’s energy infrastructure, have intensified concerns. Ukraine’s retaliatory strikes on Russian oil facilities, with at least seven refineries targeted by drones this month, have added to the strain.
The disruptions to Russian oil refineries have exacerbated pressure on fuel markets, resulting in increased demand for available crude oil cargoes, according to analysts at ANZ Research. Approximately 12% of Russia’s total oil processing capacity has been affected by these disruptions.
Furthermore, ANZ Research noted that Indian refineries’ refusal to accept Russian crude transported on PJSC Sovcomflot tankers due to U.S. sanctions has contributed to the tightening of global market conditions.
In the Middle East, ongoing conflicts have heightened tensions, with Israeli forces besieging two Gaza hospitals, according to reports from the Palestinian Red Crescent. The Israeli military’s actions, coupled with clashes at Gaza’s main Al Shifa hospital, have intensified the situation. U.S. Secretary of State Antony Blinken cautioned Israeli Prime Minister Benjamin Netanyahu about the risks of global isolation if Israel were to attack the Palestinian city of Rafah in the Gaza Strip.
Elsewhere in the region, U.S. forces intercepted six Houthi unmanned aerial vehicles over the southern Red Sea after the group launched four anti-ship ballistic missiles toward a Chinese-owned oil tanker, as confirmed by U.S. Central Command on Saturday.