Oil prices rose more than 1% on Tuesday due to escalating tensions in Europe and the Middle East, where geopolitical risks continue to threaten global crude oil supplies.
WTI crude oil futures rose $1.24 per barrel, or 1.54%, to settle at $81.57 per barrel on Tuesday. As of the time of publication, it is now at $80.68 per barrel, up 1.20%.
(West Texas Intermediate (WTI) crude oil futures chart, source: FX168)
Brent crude futures rose $1.08 per barrel, or 1.28%, to settle at $85.33 per barrel on Tuesday. As of the time of publication, it is now at $84.50 per barrel, up 1.17%.
(Brent crude oil futures chart, source: FX168)
[Market News Analysis]
According to Russian officials and Ukrainian intelligence sources, the drone attack in Ukraine caused a major fire in an oil tank at the port of Yuzhny, which pushed up oil prices.
The ongoing attacks on Russian refineries pose a threat to global physical supply and push up the risk premium of crude oil futures prices.
John Kilduff, a partner at Again Capital, said: "The Ukrainian attack has made the market realize that Russian energy infrastructure is in danger, and the global market needs these crude oil and refined oil products to control prices."
Meanwhile, Israeli Foreign Minister Israel Katz has warned that Israel will soon decide whether to engage in an all-out war with Hezbollah, even though the US is trying to avoid a larger war between the two.
New York Federal Reserve Bank President John Williams said that interest rates will gradually fall over time. He did not reveal when the US Central Bank will launch monetary easing measures, but this has pushed up oil prices.
Boston Fed President Susan Collins warned not to be too excited about recent inflation data and to keep investors vigilant and set a ceiling for oil prices. Collins said: "It is too early to judge whether inflation will continue to return to the target of 2%."
Meanwhile, the market is also paying attention to US inventory data to gauge whether summer driving season oil demand will increase.
According to analysts surveyed by Reuters, US crude oil inventories are expected to decline by 2.2 million barrels last week.
The American Petroleum Institute will release its latest US petroleum inventory report later, followed by government data on Thursday morning.
In North America again, according to a report released by Deloitte on Tuesday by the Alberta provincial government, Canada's proposed limits on oil and gas emissions will prompt companies to cut production rather than invest in expensive carbon capture and storage (CCS) technology.
The Canadian government led by Prime Minister Justin Trudeau is drafting regulations to force Canada's most polluting industries to cut emissions to 137 million tons by 2030, a 37% reduction from 2022 levels. The main oil-producing province of Alberta and the oil industry oppose the plan, seeing it as a production ceiling.
Despite increasing uncertainty in demand, oil prices continue to rise and have become a focus of attention. Eric Lee, global energy strategist at Citigroup, expects the market to become more nervous due to the complex supply and demand dynamics. However, he pointed out that geopolitical factors and weather patterns are the reasons that make the market tense. However, there are two factors that may ease this tension: the slowdown in US gasoline demand and the problem of refinery profitability. He said: "We generally believe that the fundamentals, supply and demand and global inventories will increase significantly next year." He also warned that: "I think when the market sees this, it is bearish for prices and it may be decoupled from other industries." "Oil prices could reach $60 a barrel next year."
According to the latest report from the US Bank strategist, the oil market may usher in a turbulent year. The report warns that crude oil demand is "caught in a quagmire," and if global inventories continue to rise, oil prices will "collapse." According to data from the US Bank's commodity research team, global oil demand growth slowed to 890,000 barrels per day in the first quarter of this year, and data shows that consumption will further slow in the second quarter. At the same time, oil inventories have increased by 1.7 million barrels per day since mid-February. The US Bank said: "Supply growth has led to excess inventory, but demand has also played a role."