Black gold is back in demand: oil prices are skyrocketing amid global factors
20 February 10:26
Global oil prices have risen and are approaching their first weekly increase in three weeks amid heightened geopolitical tensions between Washington and Tehran. Investors are concerned about a possible escalation of the conflict.
This was reported by Reuters, according to "Komersant Ukrainian".
Oil prices rose
Brent crude futures rose 25 cents, or 0.4%, to $71.91 per barrel, while US WTI crude rose 31 cents, or 0.5%, to $66.74.
The day before, oil prices reached their highest level in six months, which was the result of a combination of geopolitical risks, declining US inventories, and fears of possible supply disruptions.
Additional support for the market came from data from the Energy Information Administration, according to which US crude oil inventories fell by 9 million barrels amid growth in refining and exports.
At the same time, expectations regarding interest rates in the US held back price growth. Analysts note that tighter monetary policy could limit demand for oil, despite the traditionally positive impact of low rates on commodity markets.
The main reasons for the price increase
The main driver of price growth was the escalation of tensions around Iran. US President Donald Trump said that Tehran would face “serious consequences” if no agreement was reached within 10-15 days on the nuclear program, which Iran considers peaceful, but the US considers to have military implications.
Against this backdrop, Iran announced plans to conduct joint naval exercises with Russia. The announcement came a few days after the temporary closure of the Strait of Hormuz for military maneuvers.
Analysts note that about 20% of global oil supplies pass through the Strait of Hormuz, so any destabilization in the region creates risks for the global market. It is these fears that are keeping prices near their multi-month highs.
In addition, the market is weighing the factor of excess supply. Discussions within OPEC about a possible increase in production from April, as well as estimates by JP Morgan analysts, indicate that the oil surplus may persist until the end of the year if producers do not cut production.
At the same time, investors are monitoring the progress of peace talks between Ukraine and Russia in Geneva, mediated by the US. According to experts, any developments in this geopolitical dimension could also affect the oil risk premium and short-term price dynamics.
