Early on Friday, the price of crude oil increased on the international market due to the escalating geopolitical tensions in the Middle East, with ICE Brent trading above $91 a barrel.
With tensions in Europe further restricting the supply of crude oil for the market, the global oil market may be headed for a second weekly increase. Despite a notable increase in supply-side uncertainty, the market is generally optimistic about the expansion of fuel demand globally as economies recover.
By 04:25 GMT, Brent crude had increased by 40 cents, or 0.4%, to $91.05 per barrel. West Texas Intermediate crude for the United States went up 23 cents, or 0.3%, to $86.82 per barrel. On Thursday, both benchmarks reached their highest level since October.
“Oil prices look set for further upside in the short term as a more positive economic backdrop is joined by ongoing supply tightness and rising geopolitical risks,” ANZ analysts Daniel Hynes and Soni Kumari said in a note, as the bank raised its 3-month price target for Brent to $95 a barrel.
Brent and WTI are set to notch a more than 4% gain this week, climbing for a second straight week, after third-largest OPEC producer Iran vowed revenge against Israel for an attack that killed high-ranking Iranian military personnel.
Israel has not claimed responsibility for the attack on Iran’s embassy compound in Syria on Monday. Ongoing Ukrainian drone attacks on refineries in Russia may have disrupted more than 15% of Russian capacity, a NATO official said on Thursday, hitting the country’s fuel output.
The Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, known as OPEC+, this week kept their oil supply policy unchanged and pressed some countries to increase compliance with output cuts.
“Further clampdowns on adherence to quotas should see output fall further in Q2,” the ANZ analysts said.
“The prospect of a tighter market should see a drawdown in inventories during the second quarter.” Heavy oil supply has also tightened globally after Mexico and the United Arab Emirates cut exports of these grades. This comes amid solid global oil demand growth of 1.4 million barrels per day (bpd) in the first quarter, JP Morgan analysts said in a note.
“Our high-frequency demand indicators estimate that total oil consumption in March averaged 101.2 million bpd, 100,000 bpd above our published estimates,” they said. Investors are awaiting a U.S. March employment report later on Friday for further clues on the health of the U.S. economy and the direction of its monetary policy
