Adedapo Adesanya
By Adedapo Adesanya
Oil prices rose on Monday on concerns that tensions in the Middle East and Russia’s ongoing invasion of Ukraine could curb global supplies.
The price of Brent crude closed higher by 66 cents or 0.9 per cent to $77.99 per barrel, and the US West Texas Intermediate (WTI) crude grew by 50 cents or 0.7 per cent to $72.78 a barrel.
Both contracts gained for the first time in four sessions as traders have been closely following the situation in the Middle East, where progress on ceasefire negotiations between Israel and Hamas doesn’t seem to be on the horizon, indicating tensions in the oil-producing region are set to linger.
For instance, the US continued its campaign against Houthis in Yemen on Monday, whose attacks on shipping vessels have disrupted global oil trading routes.
The US mounted strikes on Iranian proxy groups in Syria as tensions rise between the US and Iran following the death of three American soldiers in a drone attack in Jordan last week.
According to market analysts, hopes of a ceasefire between Israel and Hamas drove some of this weakness, however, for now, a ceasefire does not appear imminent.
Also, in Russia, two Ukrainian drones struck the largest oil refinery in the country’s south on Saturday in the latest in a series of long-range attacks on Russian oil facilities, which has reduced Russia’s exports of naphtha, a petrochemical feedstock.
Monday’s gains come after oil prices slumped 7 per cent in the previous week on concerns about weak economic activity in China, the world’s largest oil importer, and fading hopes of imminent interest rate cuts in the US, the world’s largest oil producer.
Data on Monday showed US services sector growth picked up in January, dampening hopes of rate cuts even more and pushing the US Dollar to its highest in almost three months against other major currencies.
A stronger greenback lowers demand for Dollar-denominated oil from investors holding other currencies.
The US Federal Reserve Chairman, Mr Jerome Powell said that while the US economy is strong and inflation is falling, interest rate cuts were not likely to happen in the next couple of months.
Last Wednesday, Mr Powell said the rate would remain unchanged for now, at around 5.5 per cent, which represents a 23-year high.
“Our confidence is rising. We just want some more confidence before we take that very important step of beginning to cut interest rates,” Mr Powell said in an interview.
