While geopolitical tensions in Europe increased as a result of remarks made by Russian President Vladimir Putin over the weekend, oil prices rose in early trade on Monday as worries about financial sector volatility subsided. Brent crude prices increased 33 cents or 0.4% to $75.32 per barrel. The price of U.S. West Texas Intermediate crude was $69.65 a barrel, up 39 cents or 0.6%. Last week, WTI recovered 3.8% and Brent increased 2.8% as concerns about the banking industry subsided.
According to IG analyst Tony Sycamore, “there has been a rally in risk assets on the open this morning, more around the absence of any new bad banking revelations over the weekend rather than any positive new announcements as such.” With a 16% decline in the previous two weeks, he continued, the increase in oil prices was more of a relief rally and a correction. Prices also increased when President Vladimir Putin declared he would install tactical nuclear weapons in Belarus, heightening geopolitical tensions in Europe over Ukraine. Putin received criticism from NATO on Sunday for his “dangerous and reckless” nuclear talk.
Aleksandr Novak, the deputy prime minister of Russia, declared on Friday that the country was extremely close to meeting its goal of reducing oil production by 500,000 barrels per day (bpd), or to about 9.5 million bpd. Russia is anticipated to keep up crude oil exports despite falling output by reducing refinery output in April, according to information from industry sources and calculations by Reuters on Friday.
The latest EU embargo has so far had a greater impact on Russian oil product exports than on crude exports, with tonnes of diesel sitting on ships waiting for customers. Refineries in France are being disrupted by labor unrest, which lowers the demand for oil and lowers fuel production. The release of China’s manufacturing and services PMIs later this week will be closely watched by investors. In the United States, oil rigs increased by four to 593 last week, the first increase in six weeks, while petrol rigs remained stable at 162, according to data on Friday from energy services company Baker Hughes Co.
