Oil prices rose more than 1 percent due to heating up geopolitical tensions in Europe. A number of Western countries have threatened to impose severe sanctions on Russia.
World crude oil prices strengthened in Asian trading earlier in the week (24/January) driven by rising geopolitical tensions in Eastern Europe. Brent oil is currently in the range of $88.80 per barrel or up 1.25 percent from the daily open price. Meanwhile, WTI (West Texas Intermediate) was up 1.47 percent at around $86.01 per barrel.
Oil prices have actually posted gains for the fifth week in a row since the end of last year. This bullish rally was triggered by the prospect of a decrease in supply and an increase in global demand. At the same time, OPEC+ opted to maintain production policies which analysts deemed needed to be revised with an increase.
Russia-Ukraine conflict is getting hotter, oil supply is threatened
The latest escalation of geopolitical tensions in Eastern Europe came after the US withdrew staff from the embassy in Ukraine. After that, the US and its allies threatened to impose severe sanctions on Russia for trying to install a pro-Russian leader in the Ukrainian government.
This condition supports the bullish rally in oil prices which has posted a gain of 10 percent so far this year. Oil prices have the potential to resume their bullish trend if the prospect of global oil demand tightens and tensions in Europe and the Middle East do not subside.
"Investors remain bullish on oil prices amid volatile geopolitical risks in Russia and Ukraine as well as rising tensions in the Middle East, while OPEC+ failed to meet its production targets," said Kazuhiko Saito, chief analyst at Fujitomi Securities Co Ltd. Saito then added that the increase in crude oil prices in recent days was also supported by expectations of higher US oil demand amid the cold weather.
Please note, US crude oil inventories have continued to decline in the past month. The US Energy Agency even reported that the number of rigs fell for the first time in 13 weeks. This fact underlies the expectation of an increase in energy demand in Uncle Sam's country.
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