The benchmark crude WTI (CM:CL) jumped by nearly 3% to $87.40 today as mounting global geopolitical tensions weigh on traders’ sentiments.
Russian Energy Supply Under Pressure
The Russia-Ukraine conflict has progressed towards increasing Ukrainian drone attacks on Russian energy assets. Now, the International Energy Agency (IEA) has warned that this could mean potential disruptions for the global energy markets. According to IEA’s estimates, nearly 500,000 to 600,000 barrels a day of Russian crude capacity could be offline at present.
Additionally, repairing damaged energy assets, such as refineries can mean weeks of downtime. This, in turn, could mean lower Russian oil-product exports. According to Bloomberg, Russia’s monthly crude processing volumes are now at their lowest level in nearly a year.
Divergent Demand Narratives
The IEA has lowered its 2024 demand outlook for oil by nearly 100,000 barrels a day. OPEC, on the other hand, sees a robust demand scenario over the coming months. While OPEC’s supply cuts are still in place, the organization’s upcoming meeting on June 1 could potentially change that scenario.
In the Middle East, any potential retaliatory strike by Iran on Israel could mean an escalation in the conflict in the region. This could lead to higher oil prices. Meanwhile, the Biden Administration is moving to substantially limit oil drilling in Alaska. The proposed regulation, according to Bloomberg, could restrict drilling in Alaska’s North Slope to roughly half of the initial 23 million acres set aside for energy exploration in the region.
Is the Price of Oil Expected to Go Up?
The global geopolitical upheaval and robust energy demand expected over the summer months are keeping oil prices buoyant this week. In sync, the TipRanks Technical Analysis tool continues to flash Strong Buy signals for oil on a monthly timeframe.
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