Oil prices increased by over $1 a barrel on Monday as various geopolitical factors influenced market dynamics. Following drone strikes in Ukraine and the United States’ announcement regarding Venezuelan airspace, Brent crude futures climbed by $1, or 1.6%, reaching $63.38 a barrel by 9:14 a.m. CDT (1514 GMT). Meanwhile, U.S. West Texas Intermediate crude saw a gain of 94 cents, or 1.61%, settling at $59.49 a barrel.
Geopolitical Tensions Drive Market Optimism
According to Phil Flynn, a senior analyst at the Price Futures Group, the combination of Ukrainian military actions against Russian assets and OPEC’s decision to maintain output levels contributed to a buoyant market sentiment. He noted, “Ukrainian drone attacks on Russian shadow fleet as well as a commitment by OPEC to maintain current production levels has the market in an optimistic state.” This optimism arises despite ongoing concerns about demand fluctuations.
The situation escalated when the Caspian Pipeline Consortium (CPC), responsible for transporting approximately 1% of global oil, reported damage to one of its mooring points at the Novorossiysk terminal. Although Chevron, a shareholder in the CPC, confirmed operations continued at the terminal, the incident sparked immediate reactions, leading to increased oil prices. Giovanni Staunovo, an analyst at UBS, highlighted that the attacks on the CPC export terminal were pivotal in driving prices higher.
Recent military actions by Ukraine included strikes on two oil tankers headed to Novorossiysk, further complicating the supply situation in the Black Sea region.
OPEC’s Decision Stabilizes Supply Expectations
OPEC, along with its allies, opted to keep production levels unchanged in a meeting earlier this month, a decision that has provided stability amid market fears of a potential supply glut. Anh Pham, a senior analyst at LSEG, commented on the positive market response, stating, “For some time, the narrative has centred on an oil glut, so OPEC+’s decision to maintain its production target provided some relief and helped stabilize expectations for supply growth in the coming months.”
Despite this recent uptick, Brent and WTI crude futures faced declines for four consecutive months, marking their longest losing streak since 2023. This trend was primarily driven by increasing expectations for higher global supply.
The implications of a U.S. closure of airspace over Venezuela, a key oil producer, further contribute to the uncertainty surrounding oil markets. On Saturday, U.S. President Donald Trump declared the airspace above and around Venezuela closed, heightening concerns about potential disruptions in oil supply. Trump later mentioned a conversation with Venezuelan President Nicolas Maduro, although details of that discussion remain undisclosed.
As global oil demand continues to evolve, analysts will be watching closely how these geopolitical tensions and production decisions impact pricing and supply in the coming months.
