Brent inches up on escalating geopolitical tensions and weak dollar

The front-month ICE Brent contract has inched up by $0.14/bbl on the day, to trade at $64.82/bbl at 09.00 GMT.

IMAGE: Brent crude price chart. Getty Images

Upward pressure:

Brent futures have found support amid escalating geopolitical tensions, as the conflict between Russia and Ukraine has intensified and Iran is reportedly prepared to reject a nuclear deal proposal from the US.

Over the weekend, Ukraine and Russia engaged in one of the largest drone battles of their war. Additionally, Ukraine blew up a Russian highway bridge as a passenger train crossed and launched an attack on nuclear-capable bombers deep inside Siberia, according to Reuters.

"Oil prices were supported by rising geopolitical tensions. Ukraine struck air bases deep in Russia, putting a dent in efforts to reach a peace deal," commented Daniel Hynes, senior commodity strategist at ANZ Bank.

Meanwhile, a senior Iranian diplomat told Reuters on Monday that Iran was set to reject a US proposal to resolve the decades-old nuclear dispute, as the plan does not meet Iran's interests. If the nuclear talks with Iran collapse, ongoing sanctions could continue to restrict Iranian oil supply, thereby supporting global oil prices.

Further support has come from a weak dollar. The dollar index hovered near six-week lows earlier today as investors assessed the potential impact of President Donald Trump's tariff policies, which could slow economic growth and fuel inflation. A weaker dollar typically supports Brent's price, as it makes dollar-priced commodities like oil more affordable for holders of other currencies.

Additionally, eight OPEC+ members agreed to raise their combined oil output by 411,000 b/d in July, compared to June’s levels. This increase was smaller than many in the market had expected, easing concerns about a significant supply surge.

Dollar weakness, growing geopolitical tensions and "a supply hike from OPEC+ that fell short of expectations all provided a boost," two analysts from ING Bank noted.

Downward pressure:

Kazakhstan has informed OPEC that it does not intend to cut its oil production, according to a Thursday report by Russia's Interfax news agency, citing the country’s deputy energy minister, Reuters reported.

This announcement has added some downward pressure on Brent prices.

By Tuhin Roy

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