Mar 25 2024: Oil prices experienced a notable surge in Asian trading on Monday, driven by growing concerns over tighter global supply dynamics due to escalating geopolitical tensions in various regions. Additionally, a shrinking U.S. rig count further contributed to upward pressure on oil prices.
Brent crude futures rose by 39 cents, marking a 0.5% increase to reach $85.82 per barrel at 0759 GMT. Similarly, U.S. crude futures climbed 40 cents, also registering a 0.5% gain, to reach $81.03 per barrel.
Last week, both benchmarks recorded minor declines of less than 1% compared to the previous week, partly influenced by a stronger U.S. dollar that rose approximately 1% during the same period.
Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan Securities, highlighted the impact of escalating geopolitical tensions on oil markets. Rising conflicts in the Middle East, including between Russia and Ukraine, as well as increased attacks on energy facilities, have raised concerns about global oil supply.
The U.S. oil rig count decreased by one to 509 last week, according to data from energy services firm Baker Hughes. This decline suggests potential reductions in future oil supply.
Notable events contributing to the supply concerns include Moscow’s recent missile and drone attacks on Ukraine, which also targeted energy infrastructure. Ukraine, in response, has targeted Russian oil infrastructure in recent drone attacks, impacting about 12% of Russia’s total oil processing capacity.
Furthermore, Indian refineries are reportedly refusing Russian crude carried on PJSC Sovcomflot tankers due to U.S. sanctions, adding to the tightness in global oil markets.
In the Middle East, ongoing conflicts and tensions have added to market uncertainties. Israeli forces besieged Gaza hospitals, leading to intense clashes, while U.S. forces engaged Houthi unmanned aerial vehicles in the southern Red Sea after missile attacks on an oil tanker.
These developments, alongside geopolitical risks and supply disruptions, have contributed to the recent surge in oil prices, with market participants closely monitoring the evolving situation for further impacts on oil supply and demand dynamics.