Brent crude oil surged past $87 on Monday as Russia’s war on Ukraine increasingly focuses on attacks on energy installations, and as mediation in the Israel-Gaza conflict fails.
On Monday at 10:14 a.m. ET, Brent crude was trading at $87.16, up 2.03%, for a 1.72-cent gain on the day. The U.S. crude oil benchmark, West Texas Intermediate (WTI), was trading at $82.45, up 2.26%, for a $1.82 gain on the day.
The latest rally also comes after OPEC+ said on Monday that it saw no need for any policy changes during next week’s planned Joint Ministerial Monitoring Committee (JMMC) meeting. In combination with geopolitical developments in the Middle East and Russia, including continuing attacks by Iran-backed Houthis in the Red Sea, analysts are eyeing tighter supply as the global economies fight off recession and the Fed sticks to its tentative plans for rate cuts this summer.
A Ukrainian drone attack over the weekend has reduced capacity at a Russian oil refinery to around half. Kyiv struck Russia’s Kuibyshev oil refinery in Samara, taking out one refining unit and reducing capacity by half, Reuters reports. According to Reuters calculations, in the first quarter of this year, Ukraine attacked seven Russian refineries, taking nearly 400,000 barrels per day of capacity offline.
Russia, in turn, attacked an underground natural gas storage site in Ukraine, though supplies have not been disrupted, according to Kyiv. DTEK, Ukraine’s largest energy producer, is running at 50% capacity, forcing it to suspend electricity exports, according to Ukraine’s energy ministry.
In the Middle East, hopes are now fading, again, for a ceasefire deal as Israel continues with its assault on Gaza. Also on Monday, Goldman Sachs said commodity demand would increase this year, driven by interest rate cuts by central banks, with potential returns as high as 15%.
By Charles Kennedy for Oilprice.com
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