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Oil Stabilizes After Weekly Advance as Geopolitical Risks Rise
(Bloomberg) — Oil steadied after a weekly gain as geopolitical risks in Russia and the Middle East came back into focus after the weekend attacks.
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Brent futures traded near $84 a barrel after posting the first weekly advance this month, and West Texas Intermediate was above $80. Ukraine continued its drone strikes on Russia’s refineries on Sunday, while An oil tanker bound for China was hit by a Houthi missile in the Red Sea on Saturday.
In Iran, President Ebrahim Raisi and Foreign Minister Hossein Amirabdollahian died in a helicopter crash, the semi-official Mehr news agency reported. Supreme Leader Ayatollah Ali Khamenei said “there will not be any disruption in the country’s affairs” as a result of the incident.
“The market has become increasingly insensitive to geopolitical developments and the large amount of OPEC surplus production is likely contributing to this,” said Warren Patterson, head of raw materials strategy at ING Groep NV in Singapore. “We may have to wait for more clarity from OPEC+ on its production policy to exit the break.”
The global benchmark Brent is about 9% higher this year due to OPEC+ supply cuts, but prices have cooled since mid-April as geopolitical tensions have eased. Market watchers are turning their attention to the next producer group meeting on June 1, but are largely expecting an extension of existing restrictions.
There is increasing pessimism among hedge funds, with money managers reducing their net long positions in Brent for a second week. They are now the least optimistic since January. There was also a pullback in bets on rising gasoline prices ahead of the U.S. summer car season.
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