Oil Hits 2-Month High on Geopolitical Tensions, Hurricane
Crude oil prices climbed to two months high in the global commodity market on Tuesday followed rising geopolitical tensions hurricane in the Caribbean.
The price surge has been persistent in the last three week while the recent survey showed the Organisation of Petroleum Exporting Countries (OPEC) oil production was largely unchanged last month, according to ING commodities strategists – Ewa Manthey and Warren Patterson.
ICE Brent crude traded at $86.83 per barrel, representing an increase of 0.27% from the closing price of $86.60 per barrel in the previous trading session.
The American benchmark West Texas Intermediate (WTI) traded at $83.53 per barrel at the same time, a 0.18% rise from the previous session that closed at $83.38 per barrel.
While the outlook on the supply side remains uncertain, demand for fuel is expected to increase as the travel-heavy summer vacation season begins. The Israel-Hamas conflict continues to escalate and increases the risk of oil supply disruptions.
If official data from the Energy Information Administration (EIA) due on Wednesday reveals a reduction in the amount of gasoline and oil stockpiles, prices are predicted to gain further upward support.
The US, the world’s biggest oil consumer, will kick off travel season with Independence Day holiday on July 4. Forecast from the American Automobile Association showed that overall travel during the holiday period will be 5.2% higher than in 2023, with car travel increasing by 4.8% from last year.
The longstanding Israeli-Palestinian conflict is continuing to raise geopolitical risks in the Middle East. Israel is continuing its relentless onslaught on the besieged Gaza Strip. Latest data by the Health Ministry revealed that overall death toll reached 37,900 since last Oct. 7.
The Israeli army ordered Palestinians living in eastern areas to immediately leave ahead of a possible new ground assault in Khan Yunis, Gaza on early Tueaday.
Yemen’s Houthi group announced Monday that they carried out military operations targeting four ships in the Red, Arabian and Mediterranean Seas and Indian Ocean in solidarity with Palestinians in Gaza.
Tension is also high in the region amid ongoing conflict between Israel and Hezbollah. Lebanese Foreign Minister Abdullah Bou Habib urged countries on Friday to show solidarity with Lebanon in the face of Israeli threats to launch a war.
Recent reports also suggest that the record-breaking Hurricane Beryl is intensifying and raising the chances of flooding rains and storm surges which could hit oil operations in the Gulf of Mexico later this week, ING said.
Analysts stated that this raised concerns over a severe hurricane season that is yet to come.
Preliminary OPEC output numbers for June are now starting to be published. OPEC production declined by 80,000 barrel per day (b/d) month-on-month to 26.98 million b/d in June, according to a Bloomberg survey.
The monthly production remained almost steady for a third month straight as some key members continued to produce oil above agreed limits. According to the survey, the numbers show that Iraq and the UAE have yet to fully implement cutbacks as per the agreed production quota since the start of the year.
It is reported that Iraq reduced output by 30,000 b/d to 4.25 million b/d last month, however still remains about 250k b/d above the production quota.
Saudi Arabia’s production remained largely steady at 8.99 million b/d, while it reduced oil exports by around 9% to 5.61 million b/d in June.
Lastly, Nigeria reported a production loss of 30,000 b/d to 1.43 million b/d last month. Last month, OPEC+ members planned to gradually reverse production cuts and begin to revive output from the fourth quarter. NCDMB to Achieve 70% Local Content by 2027 – Executive Secretary
