Oil advances on rising geopolitical tensions

Oil rose as geopolitical tensions from Russia to Iran ratcheted higher while strength in equity markets increased the appeal of risk assets, reports Bloomberg.

West Texas Intermediate climbed to around $71 a barrel, up more than 5.0 per cent for the week, while Brent neared $75. The Russia-Ukraine conflict has rapidly intensified following months of bloody attrition, with the use of longer-rage missiles by both sides this week. At the same time, Iran said it will increase its nuclear fuel-making capacity after it was censured by the UN’s International Atomic Energy Agency.

A gain in equity markets also gave crude a boost, though the rally was capped by a stronger dollar that makes commodities priced in the currency less appealing. Euro-area business activity also unexpectedly shrank, a sign of the risks from heightened discord over trade.

Still, bullish signs for crude have arisen this week. Brent’s nearest timespread hit the strongest level in five weeks -- indicating tighter supplies -- and an overhang of West African shipments is beginning to ease. Profits from turning crude into fuel have climbed, in another positive indicator for demand.

Oil has swung between weekly gains and losses since mid-October, with a strong dollar, ample supply and indications of weak demand providing headwinds. At the same time, geopolitical tensions -- including the Kremlin’s revamp of its nuclear doctrine this week -- have caused temporary gains but failed to provide an extended uplift in the face of widespread expectations of a crude surplus next year.—News Desk