Mar 18 2024: Oil prices in Asian trading extended last week’s gains, increasing nearly 4%. This upward trend reflects perceptions of tightening supply and heightened risks due to ongoing attacks on Russian energy infrastructure.
During the Asian session, Brent crude oil futures for May delivery climbed by 32 cents to reach $85.66 a barrel, while the April contract for U.S. West Texas Intermediate (WTI) crude rose by 40 cents to $81.44. The more active May delivery contract for WTI traded 37 cents higher at $80.95 per barrel.
Vandana Hari, founder of oil market analysis provider Vanda Insights, highlighted that attacks on Russian refineries added a risk premium of $2-$3 per barrel to crude prices last week. These risks continued over the weekend with additional attacks, contributing to the ongoing increase in prices.
The attacks have disrupted about 7% of Russian refining capacity in the first quarter, affecting the export of crude varieties to markets like China and India.
In addition to supply concerns, geopolitical tensions in the Middle East have added to market uncertainties. Israeli Prime Minister Benjamin Netanyahu’s confirmation of plans to push into Gaza’s Rafah enclave further heightened these concerns.
Investors are also closely watching the U.S. Federal Reserve’s meeting this week for insights into potential interest rate cuts. Lower interest rates could stimulate demand in the U.S., the world’s largest oil consumer, further supporting oil prices.
Despite some volatility, both Brent and WTI futures have recorded gains in 2024, with Brent up 11% and WTI up 13% as of Friday’s close. This positive trajectory reflects market responses to supply tightness, geopolitical events, and expectations regarding interest rate policies.