The recent increase in Brent and WTI oil prices can be attributed to geopolitical tensions, particularly the conflict between Israel and Iran. On April 5, Brent crude oil rose by 0.6% to $91.17 per barrel, while US crude oil increased by 0.4% to $86.9. These prices are at their highest in 6 months, with both Brent and WTI seeing increases of more than 4% this week.
Iran’s potential direct attack on Israel has raised concerns about escalating geopolitical risks. As the third-largest oil producer in OPEC, any direct attack on Iran could lead to a significant disruption in global oil supply. Furthermore, a NATO official mentioned that Russian oil refineries may see a 15% reduction in capacity due to attacks by Ukraine, affecting Moscow’s gasoline output. Despite these tensions, OPEC+ decided to maintain its production policy unchanged this week, putting pressure on members to comply with production cuts.
On another front, the recent US employment report for March showed a vibrant labor market, with the creation of 303,000 new jobs. This could lead to increased oil demand but might also delay the expected interest rate reduction by the US Federal Reserve. Analysts forecast a rise in global oil demand by 1.4 million barrels a day in the second quarter, while US energy companies have reduced drilling rigs for three consecutive weeks, indicating potential future declines in oil and gas output.
The recent events suggest that geopolitical tensions and economic factors are intertwined when it comes to global oil prices. While there is concern over potential conflicts between major producers like Israel and Iran or attacks on key refineries like those in Russia or Ukraine, economic indicators such as job creation and interest rates can also impact oil demand and supply.
In conclusion, while geopolitical tensions continue to pose risks for global oil markets, economic factors such as job creation and interest rates are also important considerations when predicting future trends in these markets.