Following a decline in the previous session, oil prices registered a slight uptick on Tuesday. Investors carefully evaluated geopolitical uncertainties in the Middle East, which have played a significant role in shaping oil market dynamics lately.
By 0308 GMT, US West Texas Intermediate crude prices had gained 26 cents to reach $82.16 per barrel. Similarly, global benchmark Brent crude oil futures rose by 27 cents to trade at $87.27 per barrel.
The previous session had witnessed a drop of 29 cents for both benchmarks, driven by indications that the recent escalation of hostilities between Israel and Iran had not disrupted oil supplies from the region.
According to Sugandha Sachdeva, founder of Delhi-based research firm SS WealthStreet, the receding geopolitical risk premium has impacted crude oil prices since supply has not been significantly disrupted. However, she emphasized that the evolving geopolitical landscape remains crucial in guiding crude oil prices.
“While there are no indications of an imminent full-scale war between the countries involved, any escalation in tensions could quickly reverse the current trend,” Sachdeva added.
ANZ analysts have also highlighted the impact of new sanctions on Iran’s oil industry, which expand the scope of existing sanctions to include international ports, ships, and refineries that knowingly process or transport Iranian crude.
On Monday, EU foreign ministers agreed in principle to impose additional sanctions on Iran in response to its missile and drone strikes on Israel, as stated by Josep Borrell, the head of the bloc’s foreign policy.
“The geopolitical backdrop is still very fraught with so many risks at the moment, so clearly we’re going to see a lot of volatility until there’s a lot more clarity around it,” commented ANZ analysts in a podcast.
Meanwhile, investors are also awaiting key economic data from the US this week, including gross domestic product figures and personal consumption expenditure data, which will provide insights into the trajectory of monetary policy.
Analysts surveyed by Reuters expect US crude oil inventories to have increased last week, while refined product stockpiles are likely to have decreased.
“Sticky US inflation figures, hawkish statements from key Fed officials, and rising US inventories are all acting as constraints on crude oil price growth,” concluded Sachdeva.
