Oil Rises, UAE Attacks Add to Risk Premium
Oil prices extended gains on Monday (May 18) after prospects for peace in the Middle East darkened following an attack on the Barakah nuclear power plant in the United Arab Emirates. This development added to the supply risk premium, amid escalating drone attacks and rhetoric pointing to an escalation of the conflict.
Brent futures rose 57 cents (0.52%) to US$109.83 a barrel at 08:08 GMT, after briefly touching US$112—the highest since May 5. WTI rose 79 cents (0.75%) to US$106.21 after touching US$108.70, the highest since April 30. The front-month WTI contract (June) expires on Tuesday.
Both benchmarks had rallied more than 7% last week after hopes of a deal to halt attacks and seizures of ships around the Strait of Hormuz faded. Last week's Trump-Xi talks also ended without any sign from the world's largest oil importer that Beijing would help de-escalate the conflict sparked by the US-Israeli attack on Iran.
In the region, Saudi Arabia reported intercepting three drones entering Iraqi airspace and warned it would take necessary operational measures against any attempted violation of sovereignty. The UAE stated it was investigating the source of the attack on the Barakah facility and asserted its right to respond to what it called a "terrorist attack."
From Washington, Axios reported that Trump was scheduled to meet with national security advisers on Tuesday to discuss military options. Meanwhile, the Trump administration on Saturday let expire a sanctions waiver that previously allowed countries including India to purchase Russian oil via sea after a one-month extension, adding to supply uncertainty in the global market.
The combination of geopolitical risks, the threat of shipping disruptions, and uncertainty about sanctions policy has the potential to maintain high oil volatility. For the market, persistently high oil prices amplify inflation risks and could tighten financial conditions if central banks are forced to adopt more restrictive measures. (arl)*
Source: Newsmaker.id
