Oil Climbs as Geopolitical Risks Mount From Russia to Iran
Oil rose after Ukraine attacked a key Russian oil port and Iran seized a tanker near the Strait of Hormuz, injecting a fresh geopolitical premium into prices.
Global benchmark Brent rallied the most in three weeks — at one point adding as much as 3% — before paring those gains. West Texas Intermediate also advanced.
A major drone attack damaged an oil depot and a vessel in the vital Black Sea port of Novorossiysk. About 700,000 barrels a day of Russian oil was shipped from there in September and October, according to vessel tracking data compiled by Bloomberg, while a nearby terminal handles more than 1.5 million barrels a day of Kazakh shipments.
The attack came on the same day that a US defense official said Iranian forces seized a tanker after it passed the vital Strait of Hormuz chokepoint, through which about a fifth of the world’s oil flows. While authorities are still confirming the nature of the diversion toward the country’s territorial waters, Friday’s event would add to concerns that Iran is turning to hijacking merchant ships again.
The twin concerns come against the backdrop of a tightening of US sanctions against Russia. Curbs on the country’s two largest oil companies, Rosneft PJSC and Lukoil PJSC, are due to kick in within days and a major trading company has begun letting employees go.
The measures are already impacting fuel prices and key figures from the International Energy Agency to Europe’s largest refiner have warned about the impact on the market from the curbs.
Friday’s bullish undercurrent helped stem a drop in crude prices, with futures down 14% this year on mounting expectations for a glut. The Organization of the Petroleum Exporting Countries and its allies have been restarting idled capacity in a bid to recapture market share, while nations outside the group have also raised production, creating a giant haul of cargoes sailing at sea.
“We’re seeing a familiar pattern here, with frequent temporary spikes and steep corrections,” said John Driscoll, founder and director of JTD Energy Services Pte. Risks from Ukrainian attacks on Russian facilities, sanctions and geopolitical uncertainty, coupled with demand for oil for the year-end, are coming together to temper the correction, he said.
Brent for January settlement rose 1.7% to $64.05 a barrel at 8:56 a.m. in New York. WTI for December delivery gained 2%% to $59.86 a barrel.
Source : Bloomberg.com
