Brent gains as geopolitical risk factors intensify

The front-month ICE Brent contract moved $0.84/bbl higher on the day, to trade at $83.12/bbl at 09.00 GMT.

PHOTO: Oil barrels. Getty Images

Upward pressure:

Brent crude has been on the rise due to escalating tensions in the Middle East after the fatal shooting of an Egyptian soldier, reigniting supply concerns in the global oil market.

The Egyptian soldier was fatally shot near the Rafah border between Egypt and the Gaza Strip, Reuters reported. “Oil increased… following the death of an Egyptian soldier in a clash with Israeli troops,” analysts from Saxo Bank reported.

Prices also moved higher after OPEC’s secretary general Haitham Al Ghais mentioned that oil demand is set to grow in the second half of this year on the back of a resilient global economy.

“[Brent] oil gained on hopes of stronger demand as the market looks ahead to the upcoming OPEC meeting [on 2 June],” ANZ Bank’s senior commodity strategist Daniel Hynes said.

Downward pressure:

Concerns about US interest rates at elevated levels for a relatively longer-than-expected period have capped some of Brent’s price gains.

The US Federal Reserve (Fed) is considering keeping interest rates steady at 5.25–5.5% until the 2% inflation target is achieved.

Higher interest rates can make the greenback stronger for non-dollar holders and dampen demand for dollar-denominated commodities like oil.

By Aparupa Mazumder

Please get in touch with comments or additional info to news@engine.online