Oil prices surged in early Asian trading on Monday as concerns over tighter global supply intensified due to escalating conflicts in the Middle East and between Russia and Ukraine. Brent crude futures rose by 0.6% to $85.95 a barrel, while U.S. crude futures gained 0.7% to $81.18 per barrel.
The increase in oil prices comes as both benchmarks saw a slight decrease of less than 1% last week compared to the previous week. The strengthening U.S. dollar, which rose by about 1% over the last week, has been a limiting factor on prices.
Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan Securities, highlighted the rising geopolitical tensions and attacks on energy facilities in Russia and Ukraine, as well as the diminishing hopes for a ceasefire in the Middle East, as factors contributing to concerns over global oil supply.
Additionally, the U.S. oil rig count fell by one to 509 last week, signaling a potential decrease in future supply. This, combined with recent attacks on Russian oil infrastructure by Ukraine and disruptions to oil refineries in Russia, has led to a surge in demand for available crude oil cargoes.
The situation in the Middle East has also added to the uncertainty in the oil market, with Israeli forces besieging Gaza hospitals and clashes continuing in the region. U.S. Secretary of State Antony Blinken warned Israel of potential global isolation if it attacks the Palestinian city of Rafah in the Gaza Strip.
Furthermore, U.S. forces engaged with Houthi unmanned aerial vehicles over the southern Red Sea after the group launched missiles toward a Chinese-owned oil tanker, according to U.S. Central Command.
Overall, the combination of escalating conflicts and supply concerns has led to a spike in oil prices, with analysts predicting continued volatility in the market in the coming days.