Friday July 19, 2024

Oil holds near eight-week high amid geopolitical tensions

By News Desk
June 26, 2024
Representational image of a working oil pumpjack. — AFP/File
Representational image of a working oil pumpjack. — AFP/File

Oil was little changed near its highest close in eight weeks amid simmering geopolitical tensions from Yemen to Russia, reports Bloomberg.

Brent crude traded above $85 a barrel, after settling on Monday at the strongest level since late April. Houthi militants have ramped up their attacks on ships off Yemen recently, while Russia has blamed the US as well as Ukraine for a missile strike on occupied Crimea and warned of retaliation.

Another bullish factor for futures is tighter supply in the months ahead. Global markets are set for a deficit in the coming quarter, the International Energy Agency said in its Oil Market Report earlier this month.

“The current bullish winds of sentiment that are driving oil prices along seem set to continue” as “conflict arenas deliver not only continued weaponry exchange, but also antagonistic rhetoric,” said John Evans, an analyst at brokers PVM Oil Associates Ltd.

Implied volatility for Brent has edged higher on the simmering geopolitical risk, including forthcoming elections in Iran, though it still remains near the lowest level in six years.

Oil is on track for a monthly gain, with prompt time spreads widening in a bullish backwardation structure, signalling tightening supply. Traders will be watching measures of inflation and other economic data this week for clues on the path for monetary policy, which may impact crude prices.

Other parts of the market are showing strength. Money managers registered the biggest-ever weekly addition in net-bullish bets in ICE gasoil, Europe’s diesel benchmark. The same gauge for Brent futures and options rose by the most since October.