In early Asian trading on Monday, oil prices experienced a notable surge driven by mounting concerns over tighter global supply amidst escalating conflicts in the Middle East and between Russia and Ukraine. Additionally, a decline in the U.S. rig count contributed to upward price pressure.
Brent crude futures rose by 52 cents, equivalent to 0.6%, reaching $85.95 per barrel at 0359 GMT. Similarly, U.S. crude futures climbed by 55 cents, marking a 0.7% increase, and reaching $81.18 per barrel.
While both benchmarks witnessed marginal declines of less than 1% last week compared to the previous week, the strengthening of the U.S. dollar by approximately 1% over the same period tempered the price surge.
Hiroyuki Kikukawa, president of NS Trading, a subsidiary of Nissan Securities, attributed the surge in oil prices to escalating geopolitical tensions and a rise in attacks on energy facilities in Russia and Ukraine. Simultaneously, diminishing hopes for a ceasefire in the Middle East further fueled concerns regarding global oil supply.
Data from energy services firm Baker Hughes revealed a decline in the U.S. oil rig count by one to 509 last week, indicating a potential reduction in future supply.
The escalation of conflicts between Russia and Ukraine intensified as Moscow launched 57 missiles and drones, targeting the capital Kyiv. This assault followed Ukraine’s recent attacks on Russian oil infrastructure, with at least seven refineries targeted by drones this month.
Analysts at ANZ Research noted that disruptions to oil refineries in Russia have exacerbated pressure on fuel markets, leading to increased demand for available crude oil cargoes. Approximately 12% of Russia’s total oil processing capacity was affected by these disruptions.
Furthermore, Indian refineries’ refusal to accept Russian crude carried on PJSC Sovcomflot tankers due to U.S. sanctions has contributed to the tightening of global oil markets, according to ANZ.
In the Middle East, tensions escalated as Israeli forces besieged two additional Gaza hospitals, resulting in medical teams being pinned down under heavy gunfire, as reported by the Palestinian Red Crescent. The situation was further exacerbated by continued clashes at Gaza’s main Al Shifa hospital, where Israel reported the capture of 480 militants.
U.S. Secretary of State Antony Blinken cautioned Israeli Prime Minister Benjamin Netanyahu against attacking the Palestinian city of Rafah in the Gaza Strip, warning of potential global isolation.
Meanwhile, in another incident in the Middle East, U.S. forces engaged 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, according to U.S. Central Command.
