Oil prices saw a surge on Monday in light of rising mounting concerns over a potential tightening of global supply. The increase was largely attributed to escalating conflicts in the Middle East and Eastern Europe, with tensions between Russia and Ukraine intensifying. Moreover, the U.S. rig count saw a decline last week, indicating further declines in oil supply.
By 6:41 GMT, Brent crude futures saw a 0.48 percent increase to $85.84. Meanwhile, U.S. crude futures saw a 0.53 percent increase to $81.06. This recovery comes following more than a 1 percent decline last week.
U.S. rig count declines
Adding to the upward pressure on oil prices is the shrinking U.S. rig count, which fell by one to 509 last week, according to data from Baker Hughes. This decline indicates a potential reduction in future oil supply, compounding the anxieties surrounding global supply levels and supporting oil prices.
Geopolitical unrest
The recent surge in oil prices is mainly due to the rising geopolitical tensions in the Middle East and Eastern Europe. Experts cited the escalating conflicts in the Middle East and attacks on energy facilities in Russia and Ukraine as key factors fueling concerns over global oil supply.
Disruptions to oil refineries in Russia, caused by recent attacks, have further tightened fuel markets, leading to an increased demand for available crude oil cargoes. Analysts noted that approximately 12 percent of Russia’s total oil processing capacity took a hit due to these disruptions. Russian attacks on Kyiv heavily impacted Ukraine’s energy system, with the largest bombardment in over two years. Meanwhile, Ukraine targeted at least seven refineries in Russia, further escalating supply concerns and supporting the upward trajectory of oil prices.
Additionally, Indian refineries refusing to accept Russian crude, due to U.S. sanctions, have exacerbated the global market tightness.
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The Middle East also witnessed a surge in tensions which further escalated concerns over oil supply, pushing prices up. With rising tensions in the southern Red Sea, key oil shipping routes are experiencing volatility and fragility.
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