Oil prices rose on Tuesday amid escalating tensions between Russia and Ukraine, intensifying market concerns about supply disruptions. The international oil market also turned its focus to the latest US employment data, speculating whether the Federal Reserve (Fed) might consider loosening its monetary policy.
Brent crude futures climbed by 0.54% to $68.52 per barrel, while US West Texas Intermediate (WTI) crude surged by 1.58% to $65.02 per barrel on Tuesday. Due to the Labor Day holiday in the US, WTI did not settle on Monday.
Priyanka Sachdeva, a senior analyst at Singapore-based financial brokerage firm Phillips Nova, noted that interest rate cuts could boost demand sentiment and provide short-term support to oil prices. The weakening performance of the US nonfarm payroll data for July has increased the likelihood of a more accommodative monetary policy.
According to Reuters’ estimates, recent drone attacks in Ukraine have forced Russia to shut down facilities that account for around 17% of the country’s refining capacity, equivalent to approximately 1.1 million barrels per day. Ukrainian President Zelensky stated on Sunday that Kyiv plans to continue targeting energy facilities within Russia.
The Russia-Ukraine conflict has been ongoing for three and a half years, with recent airstrikes escalating on both sides. Russia has been attacking Ukraine’s energy and transportation systems, while Ukraine has been targeting Russian refineries and pipelines. Daniel Hynes, senior commodity strategist at ANZ Bank, emphasized the high risks facing energy facilities within Russia.
Geopolitical tensions have further exacerbated market uncertainty. Chinese leader Xi Jinping proposed establishing a new international order centered around the “Global South” at the Shanghai Cooperation Organisation summit on Monday, seen as a direct challenge to the US-led global order.
China and India are the largest buyers of Russian oil. President Trump has imposed punitive tariffs on India for continuing to purchase Russian oil, but similar measures have not been taken against China.
The Organization of the Petroleum Exporting Countries and its allies (OPEC+) are scheduled to meet on September 7, with expectations that the organization will maintain current production levels in the short term after gradually easing production cuts over the past six months.
The International Energy Agency (IEA) based in Paris revealed that supply growth has exceeded demand in recent times. Analysts at the Dutch multinational banking group ING believe that if the oversupply situation persists, OPEC+ may reconsider cutting production levels.
(Reference: Reuters)