Oil Prices Rise Despite Geopolitical Tensions
Oil Prices Maintain Positivity
Oil prices experienced a slight increase despite concerns over potential geopolitical tensions. Reports of Israel preparing for a possible attack from Iran heightened tensions and kept the focus on supply disruptions. By 14:30 ET, futures were up 0.75% at $85.66 a barrel, while the Brent contract climbed 0.5% to $90.20 a barrel. Despite earlier gains, oil prices ended a two-week winning streak due to worries about inflation impacting a potential June Federal Reserve rate cut.
Heightened Middle East Tensions
US officials warned of a potential Iranian attack on Israel, possibly over the weekend, in retaliation for an air strike on an Iranian military commander. However, reports suggest Iran may respond in a more controlled manner, indicating a desire to avoid major conflict. The risk of Iran getting involved in a broader Middle East war has raised concerns about oil supply disruptions in the region.
Baker Hughes Rig Count Drops; IEA Cuts Oil Growth Forecast
The number of oil rigs in the US decreased by 2 to 506, indicating a lack of enthusiasm from drillers despite rising oil prices. Additionally, the IEA reduced its oil demand growth forecast for this year, citing challenges from the post-Covid rebound. The outlook for next year also suggests a slowdown in expansion.
Potential Pullback in Oil Prices
Analysts predict a possible bearish turn for oil as the year progresses due to supply growth and inflation softening demand. While geopolitical tensions currently support oil prices, a lack of actual supply disruptions could lead to struggles to maintain prices above $90 a barrel in the second half of the year.
