Oil markets are recovering
Oil prices experienced a noticeable rebound on Monday, as WTI futures rose above the level of USD 64 per barrel in an attempt to make up for their recent losses, mainly driven by escalating geopolitical tensions that threaten global energy supplies.
Engines of ascent: supply concerns:
The reason for this jump is due to two main factors:
- The continuation of the Russian-Ukrainian conflict:
Recent escalations, including the threat of Ukrainian President Volodymyr Zelensky to expand the range of strikes in response to attacks on energy infrastructure, have raised serious fears of further disruptions in regional energy flows, putting the oil market on alert.
The future of Indian procurement:
The market is closely assessing the likelihood that India will respond to US pressure to stop its purchases of Russian oil, especially after Washington imposed tariffs on New Delhi last week. Any reduction in Indian purchases could deepen Russian supply bottlenecks.
Oversupply and fluctuating demand:
On the other hand, oil gains are facing no less powerful counter-pressures:
- Expectations of an imminent surplus: eyes are turning towards the OPEC alliance meeting scheduled for this week, where the group is expected to maintain the previously planned pace of production increases, reinforcing expectations of flooding the market with surplus.
- Weak seasonal demand: in the United States, the world's largest oil consumer, signs of a decline in demand began to appear with the end of the summer driving season, putting pressure on prices from the demand side.
In the end, oil prices are at a crossroads, trying to balance short-term fears of supply disruptions due to the war, and long-term forecasts indicating weak demand and abundant supply. The market will remain on the lookout for any developments from the Ukrainian theater of operations and OPEC alliance decisions that will determine the next direction of the markets.
