4/5/2024

Brent oil above $90 for first time since Oct

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Key points:

  • Oil prices for Brent and WTI rose by more than $1 per barrel, reaching their highest since October.
  • The main reason for the increase is geopolitical tension in the Middle East.
  • OPEC+ maintained its current oil production policy.

Oil prices continued their upward movement on Thursday, adding more than $1 per barrel. The growth was driven by geopolitical tensions and production cuts, which offset the impact of cautious sentiment about a possible US Federal Reserve rate cut.

June Brent crude futures reached $91 a barrel before settling at $90.65, up $1.30 or 1.5%. May futures for American WTI oil also increased in price, reaching $86.59 per barrel, which is $1.16 or 1.4% higher than the previous close.

Middle East Tensions

Oil quotations for both brands showed significant growth at the end of Thursday’s trading, reaching their highest levels since October. The positive dynamics continued after the closing of the trading session. Factors supporting prices were geopolitical tensions and risks associated with potential supply disruptions.

The rise in prices was facilitated by news about the increased readiness of Israeli embassies around the world due to threats of attack from Iran. Tehran, OPEC’s third-largest producer, has said it intends to avenge the deaths of its troops in an attack on an embassy complex in Syria for which Israel has not claimed responsibility.

Washington on Thursday sharply criticized Israel’s actions, calling them “unacceptable.” The US also warned that future policy towards Gaza will directly depend on steps taken by Israel to ensure the security of the Palestinian population and humanitarian workers.

OPEC+ decision

At this week’s OPEC+ meeting, it was decided to maintain the current oil supply policy. At the same time, some countries participating in the alliance were required to more strictly adhere to production quotas.

ANZ analysts believe tighter quota enforcement will lead to a further decline in output in the second quarter. This, in turn, should lead to a reduction in oil reserves and an increase in prices.

A decrease in supply on the world market is also observed in the heavy oil segment. Mexico and the United Arab Emirates have reduced exports of these varieties, further supporting prices.

It is worth noting that oil demand in the first quarter of this year showed strong growth, increasing by 1.4 million barrels per day, which, according to JPMorgan analysts, is a positive factor for further market development.

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