Oil prices jumped on Monday, building on last week’s gains, as geopolitical risks in Russia and the Middle East returned to the forefront following weekend attacks.
Current Market Movements:
- Brent Crude: Traded near $84 per barrel, up by 0.88% on the day. Last week, it gained 1.45%.
- West Texas Intermediate (WTI) Crude: Priced at $78.2 per barrel, down by 1.34% on the day.
Key Geopolitical Developments:
- Ukraine-Russia Conflict: Ukraine continued its drone attacks on Russia’s refining infrastructure on Sunday.
- Red Sea Incident: A China-bound oil tanker was struck by a Houthi missile in the Red Sea on Saturday, according to Bloomberg.
- Iranian Tragedy: In Iran, President Ebrahim Raisi and Foreign Minister Hossein Amir-Abdollahian were reported killed in a helicopter crash by the semi-official Mehr news agency. Supreme Leader Ayatollah Ali Khamenei assured that there “won’t be any disruption to the country’s affairs” following the incident.
Market Analysis: Warren Patterson, head of commodities strategy for ING Groep NV in Singapore, remarked, “The market has become increasingly numb to geopolitical developments, and the large amount of spare OPEC production is likely contributing to this.” He added, “We may have to wait for further clarity from OPEC+ on its output policy to break out of the range.”
Market Context:
- OPEC+ Influence: Global benchmark Brent is up around 9% this year due to OPEC+ supply cuts, though prices have cooled since mid-April as geopolitical tensions eased.
- Upcoming OPEC+ Meeting: The market is looking towards the producer group’s meeting on June 1, with expectations for a continuation of existing production curbs.
- Hedge Fund Sentiment: There’s increased bearishness among hedge funds, with money managers reducing their net long positions on Brent for a second consecutive week, reaching the least bullish stance since January.
- Gasoline Price Bets: There has also been a pullback on bets for rising gasoline prices ahead of the US summer driving season.
The oil market remains volatile with geopolitical events influencing short-term price movements, while longer-term trends will likely depend on OPEC+ decisions and broader economic conditions.
