Oil rise as conflict in Russia escalates

Oil prices extended last week’s gains on Monday, with WTI price rising to the $83.0 per barrel level. If WTI price declines, it may encounter support near $76.0 per barrel, while resistance may be found near $84.0 per barrel.

Ukrainian attacks on Russian energy infrastructure are propping up oil prices. A report by Reuters on Monday revealed that Ukrainian attacks have idled around 7% of Russia’s refining capacity in the first quarter of the year. 

Persistent tensions in the Middle East also boost oil prices. Supply concerns provide support for oil prices, as the crisis in the Gaza area threatens to disrupt oil distribution. Tensions around the Red Sea area raise concerns that hostilities may spread in the Middle East, affecting oil supply and distribution. 

OPEC+ has kept its oil output policy unchanged, maintaining the voluntary production cuts that have already been in place through the second quarter of 2024. Russia announced additional cuts of 471K barrels per day as a result of lower refinery runs due to Ukrainian drone strikes. Iraq announced on Monday that it would reduce crude exports to 3.3 million barrels per day in the coming months to compensate for exceeding its OPEC+ quota since January.

China’s poor economic outlook is increasing concerns about reduced oil demand, putting a lid on oil prices, however, despite increasing geopolitical risks. Weak economic growth in China raises concerns about future demand, pushing oil prices down. 

Oil prices are also kept in check by a strong US dollar and high-interest rates. The Fed kept interest rates unchanged at its latest policy meeting in January, within a target range of 5.25% to 5.50. The Fed’s policy meeting on the 20th will be the highlight of this week and its outcome is likely to affect oil prices.

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Written by:
Myrsini Giannouli

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