Crude oil prices experienced an overnight rally, fuelled by a resurgence of geopolitical risks and indications of tightening supply. ANZ reported that the gains were primarily driven by renewed concerns regarding Russian supply, following reports that Donald Trump had given Russian President Vladimir Putin a 10–12 day deadline to establish a truce with Ukraine. The former US president had earlier threatened 100 per cent secondary tariffs on Moscow in an attempt to force a peace deal, which has heightened fears of potential disruptions to Russian oil flows.
Market jitters were further intensified by a new round of European Union sanctions. These sanctions included a lowered price cap on Russian crude oil and restrictions on refined products made using Russian oil in third countries. This added upward pressure to the commodity’s price.
The rally followed earlier gains after the EU announced over the weekend that it had agreed to purchase $US750 billion worth of American energy products as part of a comprehensive trade agreement. While analysts remain somewhat sceptical about the EU’s ability to absorb such substantial volumes of US oil and gas, the move is broadly anticipated to tighten the market overall.
In related news, OPEC’s Joint Ministerial Monitoring Committee recently concluded its latest meeting. The committee did not recommend any changes to the existing output policy. Instead, it urged member nations to ensure compliance with their current quotas. The market continues to anticipate that the group will raise its production targets when it convenes on August 3 to review supply for September. Brent Crude Oil last traded 0.6 per cent higher at $US68.86 a barrel.
