Oil prices retreated on Monday following a 6 percent surge last week, but remained near their two-week high as geopolitical tensions grew between Western powers and major oil producers Russia and Iran, raising supply disruption risks.
As of 6:40 GMT, Brent crude futures slipped 0.67 percent to $74.67 a barrel, while U.S. West Texas Intermediate crude futures fell 0.74 percent to $70.71 per barrel.
Ukraine-Russia tensions raise supply concerns
Both contracts last week marked their biggest weekly gains since late September, reaching their highest settlement levels since November 7 after Russia fired a hypersonic missile at Ukraine in a warning to the United States and UK following strikes by Kyiv on Russia using U.S. and British weapons. Oil prices started the new week with some easing as market participants awaited clues on geopolitical developments and the Federal Reserve’s policy outlook.
Tensions between Ukraine and Russia have escalated lately, leading to some speculation that a wider escalation could potentially impact oil supplies. Analysts noted that as Ukraine and Russia both rally to gain some leverage ahead of any upcoming negotiations under a Trump administration, tensions may likely persist into the year-end, keeping Brent prices supported around $70-$80.
Iran activates several advanced centrifuges
In addition, Iran reacted to a resolution passed by the UN’s International Atomic Energy Agency on Thursday by ordering measures such as activating various new and advanced centrifuges used in enriching uranium. Iran will activate “a noticeable number of new and advanced centrifuges of different types”, state news agency IRNA reported, citing a joint statement from Iran’s foreign ministry and its Atomic Energy Organization.
According to the statement, “The steps are being taken to protect the country’s interests and further develop the peaceful nuclear energy,” in line with national needs and within Iran’s rights.
The UN International Atomic Energy Agency’s disapproval and Iran’s response heightens the likelihood that Trump will look to enforce sanctions against Iran’s oil exports when he comes into power, which may raise oil prices. Hence, enforced sanctions could sideline about one million barrels per day of Iran’s oil exports, about 1 percent of the global oil supply.
The Iranian foreign ministry said on Sunday that it will hold talks about its disputed nuclear program with three European powers on November 29.
Read: Gold prices fall sharply from three-week high
Rising demand in China and India
Investor focus was also on rising crude oil demand in China and India, the world’s top and third-largest importers, respectively. China’s crude imports rebounded in November as lower prices drew stockpiling demand while Indian refiners increased crude throughput by 3 percent to 5.04 million barrels per day in October, buoyed by fuel exports.
This week, traders will keep an eye out for U.S. personal consumption expenditures (PCE) data, due on Wednesday, as that will likely inform the Federal Reserve’s policy meeting scheduled for December 17-18.
