Brent futures shed some early gains

The front-month ICE Brent contract has declined by $0.61/bbl on the day from Friday, to trade at $73.63/bbl at 09.00 GMT.

IMAGE: Getty Images

Upward pressure:

Brent crude’s price has gained some upward momentum over the weekend as the simmering conflict between Israel and Iran quickly escalated, with the former targeting Tehran’s oil and gas facilities.

Over the weekend, Israel struck two key energy facilities near Tehran – Shahran fuel depot and the Shahr Rey oil refinery. The strikes have caused a series of explosions, according to media reports. Both the facilities were among the largest oil infrastructure sites in Iran.

“This marks a dramatic escalation in the conflict that has hung over the oil market since Hamas attacked Israel about 20 months ago,” ANZ Bank’s senior commodity strategist Daniel Hynes remarked.

Iran also retaliated with a barrage of drones and missiles towards multiple Israeli cities including the Haifa oil refinery in northern Israel. “The risk that this conflict will impact flows of crude oil rose significantly over the weekend,” Hynes added.

Downward pressure:

Additional supply from OPEC+ producers such as Saudi Arabia and the UAE could help cushion the market against short-term supply disruptions, according to market analysts.

“OPEC sits on 5m b/d [5 million b/d] of spare production capacity, and so any supply disruptions could prompt OPEC to bring this supply back onto the market quicker than expected,” two analysts from ING Bank noted.

Earlier in June, the oil producers’ alliance agreed to raise output by 411,000 b/d for July, maintaining the same monthly increase it has implemented consistently for the past three months.

Market watchers will closely review the upcoming OPEC oil market report, due later today, for fresh insights into the group’s supply and demand outlook.

By Aparupa Mazumder

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