Oil Closes Over 1% Higher Amid Rising Tensions in Europe and the Middle East, Reports Reuters

By Georgina McCartney

HOUSTON (Reuters) – Oil prices rose by more than 1% on Tuesday, driven by increasing geopolitical tensions in Europe and the Middle East, where ongoing conflicts threaten global supply chains.

Brent crude futures settled up $1.08, or 1.3%, reaching $85.33 per barrel, while U.S. West Texas Intermediate crude futures closed $1.24, or 1.5%, higher at $81.57 per barrel.

Global benchmark Brent has recovered from an early-June low of $77.52 but remains below its $90 highs from mid-April.

The price increase was prompted by a Ukrainian drone strike that ignited a significant fire in a fuel tank at an oil terminal located in Russia’s southern port of Azov, according to Russian officials and a Ukrainian intelligence source. The port of Azov has two oil product terminals that exported approximately 220,000 tons of fuel between January and May.

The continued assaults on Russia’s oil refining infrastructure pose a risk to global physical supply and have contributed to the elevated risk premiums in crude futures. “The Ukrainian attack serves as a reminder that Russian energy infrastructure is vulnerable, and the global market needs those barrels of crude and refined products to stabilize prices,” noted John Kilduff, partner at Again Capital.

In a related development, Israeli Foreign Minister Israel Katz indicated that a decision regarding a full-scale war with Hezbollah was imminent while the U.S. attempts to prevent a larger conflict between Israel and Hezbollah in Lebanon. Special envoy Amos Hochstein was sent to Lebanon after a brief visit to Israel due to the serious nature of the situation.

“There is a high level of geopolitical risk everywhere you look,” commented Phil Flynn from Price Futures Group. “While we haven’t seen a significant impact on supply yet, that could change rapidly.”

Additionally, oil prices increased after New York Federal Reserve President John Williams stated that interest rates would gradually decrease, though he did not provide a specific timeline. However, sentiment shifted when Boston Federal Reserve President Susan Collins warned that it was "too soon to conclude whether inflation is returning durably to the 2% target."

Market participants are also attentive to upcoming U.S. stockpile data, which could offer insights into oil demand trends during the summer driving season. According to market sources referencing American Petroleum Institute figures, U.S. crude oil inventories surprised with a build last week while gasoline stocks experienced a decline.

The API data indicated that crude stocks increased by 2.264 million barrels for the week ending June 14, contrasting with expectations for a draw of 2.2 million barrels. Gasoline inventories dropped by 1.077 million barrels, while distillate stocks rose by 538,000 barrels.

Official inventory data from the U.S. Energy Information Administration is set to be released on Thursday at 11:00 a.m. EDT, delayed by one day due to the Juneteenth holiday.