Oil Prices Dip After Last Week’s Gains, Geopolitical Tensions Remain Key Driver
Oil prices eased on Monday following last week’s strong 6% rally but remained close to two-week highs. Geopolitical tensions involving Western powers and key oil producers like Russia and Iran continue to raise concerns about potential supply disruptions.
Brent crude futures dropped by 26 cents (0.35%) to $74.91 per barrel by 0440 GMT, while U.S. West Texas Intermediate (WTI) crude futures declined 27 cents (0.38%) to $70.97 per barrel. Both benchmarks reached their highest levels since November 7 last week, driven by Russia’s hypersonic missile launch in response to Ukraine’s attacks using Western weapons.
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Market Dynamics
Yeap Jun Rong, a market strategist at IG, attributed the slight pullback to traders awaiting further developments in geopolitical tensions and insights into the Federal Reserve’s policy direction. He added, “Tensions between Ukraine and Russia have escalated, increasing the perceived risk of disruptions to oil supply.”
Ongoing friction between Ukraine and Russia is expected to sustain Brent prices in the $70-$80 range as both nations aim to secure leverage ahead of potential negotiations.
Additionally, Iran’s activation of advanced uranium-enriching centrifuges following a U.N. resolution has further escalated concerns. Vivek Dhar, a commodities strategist at Commonwealth Bank of Australia, warned that this could lead to enforced sanctions on Iran’s oil exports, sidelining about 1 million barrels per day—roughly 1% of global supply.
Broader Concerns
Market analysts, including Priyanka Sachdeva from Phillip Nova, highlighted the broader risks. “The market is wary not only of potential damage to oil infrastructure but also the possibility of wider conflict involving additional nations,” Sachdeva explained.
China and India, the world’s largest and third-largest oil importers, respectively, have also influenced demand dynamics. China’s crude imports rebounded in November due to stockpiling at lower prices, while Indian refiners increased throughput by 3% year-on-year in October, supported by fuel exports.
Looking Ahead
This week, traders will focus on U.S. personal consumption expenditures (PCE) data due Wednesday, which is expected to guide the Federal Reserve’s upcoming policy meeting on December 17-18. Combined with geopolitical developments, these factors will likely shape the near-term trajectory of oil prices.
Despite Monday’s dip, ongoing tensions and demand trends may keep oil prices buoyant in the coming weeks.
