Brent surges on heightened geopolitical risks

The front-month ICE Brent contract gained $1.63/bbl on the day, to trade at $90.83/bbl at 09.00 GMT. 

PHOTO: Getty Images

Upward pressure:

Brent futures have surpassed the $90/bbl mark for the first time since October amidst escalating geopolitical tensions and supply concerns.

The oil market is “bracing for tighter supply, with OPEC’s JMMC [Joint Ministerial Monitoring Committee] pushing for members to increase their adherence to supply quotas,” ANZ Bank’s senior commodity strategist Daniel Hynes stated.

Earlier this week, seven field workers of US-based non-profit World Central Kitchen lost their lives in an Israeli airstrike in Gaza while delivering humanitarian aid.

US President Joe Biden condemned the incident, stating, “I am outraged… by the deaths of seven humanitarian workers from World Central Kitchen, including one American.”

An airstrike on Iran’s embassy in Syria resulted in the death of three Iranian military officials this week, further amplifying supply concerns in the oil market.

Iran has vowed revenge on Israel for this incident, while Israeli Prime Minister Benjamin Netanyahu declared that his country will continue military operations against Hamas militants.

“Brent vaulted comfortably above the $90 psychological mark in the previous session on the back of heightened anti-Iran rhetoric from Israeli Prime Minister Benjamin Netanyahu," market analysts from VANDA Insight's said in a note.

Downward pressure:

The US Energy Information Administration (EIA) revealed an unexpected increase of 3.21 million bbls in US crude stocks, reaching 451 million bbls on 29 March. This has reignited concerns about a demand slowdown in the world's largest oil consumer– the US – and has partially restrained Brent's upward momentum.

Oil investors worldwide are contending with remarks from US Federal Reserve (Fed) officials, including Minneapolis President Neel Kashkari, who suggested that the US central bank could forgo rate cuts this year “if progress on inflation stalls and the economy maintains its robustness,” remarked SPI Asset Management’s managing partner Stephen Innes. “Indeed, this perspective is gaining traction among a broader group of Wall Street traders,” he added.

Oil market analysts are eagerly awaiting the US March employment report, scheduled for release later today, to gauge the economic situation that will ultimately influence the Fed's rate cut decisions.

Elevated interest rates may hinder global demand, as they raise the cost of commodities like oil for non-dollar holders.

By Tuhin Roy

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