Oil Prices Start the Week Steady Amid Anticipated Geopolitical Developments
Oil futures experienced a slight decline on the first day of the week during European hours, as demand concerns balanced geopolitical tensions. Brent futures are trading at $74.40, close to the peak seen over the last two weeks. Similarly, WTI is finding buyers at $71.
Despite the escalation of tensions between Russia and Ukraine, oil prices recorded an increase of over 5% last week, as energy exports have yet to be affected. The change in Russian President Putin's nuclear doctrine, expanding the scope for Moscow's use of nuclear weapons, has heightened geopolitical tensions. Ole S. Hansen, Head of Commodity Strategy at Saxo Group, notes that a greater tension is occurring from the conflict between Israel and Iran-backed militants, marking the highest weekly gain in commodity markets since April.
Threats of sanctions against Iran are increasing as an agreement to limit Iran's enriched uranium stockpiles collapsed. This has supported markets alongside rising natural gas prices due to early winter cold in the U.S. and Europe and recovering refinery margins. However, weak growth in import demand from China and Europe, along with an increase in non-OPEC production, continues to apply pressure on oil prices.
Oil prices started the week with a slight decline, as investors monitor potential geopolitical developments. IG market strategist Yeap Jun Rong stated that the rising tensions between Ukraine and Russia have led to pricing in risks of an expansion that could affect oil supply. Additionally, in response to a resolution accepted by the UN nuclear watchdog last week, Iran has activated centrifuges used for uranium enrichment.
Investors are concerned about the possibility of damage to oil ports and infrastructure, as well as the potential for war escalation and the likelihood of more countries getting involved in the conflict. Tensions in the Middle East and global political developments are key factors that could lead to fluctuations in energy prices.