25 Jan 2022
Oil Prices Bounce Back amid Rising Political Tensions Spurring Worries of a Tighter Supply
The Index Today
Fueled by worries of a possible supply shortage informed by mounting geopolitical tensions in the Middle East and Europe, oil prices saw a rebound on Tuesday.
After a drop of 1.8% in the last session, Brent crude futures climbed by 60 cents (0.7%) to $86.87 per barrel at 0528 GMT. U.S. West Texas Intermediate (WTI) crude futures rose by 45 cents (0.5%) to $83.76 per barrel, recovering from a 2.2% drop on Monday.
Informed by tighter global supply and increasing demand, oil prices climbed to seven-year highs the previous week.
Sunward Trading Chief Analyst Chiyoki Chen said, "The market tone stays strong, supported by heightening geopolitical risk." He added, "We see profit-taking when the prices move higher, but buying appetite for oil remains solid as investors are worried about supply disruptions in the event of a Russia-Ukraine conflict."
NATO has been working on fortifying Eastern Europe in response to Russia’s targeting of Ukraine, a move which Russia has declared to be “Western hysteria”. On Monday, Yemen’s Houthis, backed by Iran, instigated a missile attack against the United Arab Emirates which was successfully blocked by the armed forces.
Satoru Yoshida of Rakuten Securities contended, "Downside risk on the oil market will be limited as any escalations of the situation in Ukraine or the Middle East will cause the prices to skyrocket."