Oil prices surge amid tight supply and global tensions

18 Mar 2024 , 09:49 AM

Early Asian trade on Monday saw a little increase in oil prices, maintaining gains from the previous week when prices increased by almost 4% due to concerns of a tightening supply.

The price of a barrel of Brent crude oil futures for May delivery had increased by 3 cents. West Texas Intermediate (WTI) crude futures for the United States were up 10 cents to $81.14 in April.

The Slavyansk refinery in Kasnodar, which processes 170,000 barrels of crude oil per day, or 8.5 million metric tonnes annually, experienced a minor fire on Saturday due to one of the strikes.

According to a Reuters study, the attacks caused Russia’s refining capacity to idle by about 7% during the first quarter.

In the Middle East, Israeli Prime Minister Benjamin Netanyahu declared on Sunday that, in spite of pressure from Israel’s friends, he will move forward with plans to invade Gaza’s Rafah pocket, where over a million displaced people are seeking refuge. Olaf Scholz, the Chancellor of Germany, stated that the move would make maintaining regional peace “very difficult.”

Lower interest rates would encourage American demand and keep oil prices high.

Despite a decline on Friday, both benchmark oil contracts ended the previous week about 4% higher. For the most part of the past month, oil prices have remained rangebound, but on Thursday, the International Energy Agency released an optimistic demand report that caused prices to rise to their highest point since November.

The demand outlook was upgraded by the organisation, which speaks for developed nations, for the fourth time since November due to vessel diversions caused by Houthi strikes in the Red Sea, which resulted in higher fuel use. This year, the IEA for the first time also forecast a modest deficit rather than a surplus.

Fuel demand in the United States helped keep prices stable while refineries finished certain projects.

WTI and Brent futures were up 13% and 11%, respectively, as of Friday’s close.

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